UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


SCHOOL  OF  LAW 
LIBRARY 


LEGAL    INVESTMENTS 

FOR 

TRUST   FUNDS 


GENERAL  PRINCIPLES 

STATUTES  AND  DECISIONS  OF  THE  VARIOUS   STATES 

TYPICAL  LIST  OF  INVESTMENTS  LEGAL  IN 

CONNECTICUT,   MASSACHUSETTS 

MARYLAND  AND  NEW  YORK 


BY 

FRANK  C.  McKINNEY 

OF  THE  NEW  YORK  BAR 


NEW    YORK 

TRUST  COMPANIES  PUBLISHING  ASSOCIATION 

1914 


T 


Copyright,  1914,  by 
FRANK  C.  McKINXEY 


PREFACE 

A  careful  search  has  revealed  the  fact  that  there  is  no  sepa- 
rate treatise  in  the  United  States  dealing  with  the  subject 
of  investments  by  trustees.  It  has  seemed  advisable,  therefore, 
to  prepare  a  volume  devoted  to  a  discussion  of  general  prin- 
ciples, a  compilation  of  the  statutes  of  the  states,  and  a  digest 
of  the  leading  decisions  in  each  state.  For  the  benefit  of 
trustees  and  for  the  purpose  of  indicating  the  extent  to  which. 
some  of  the  states  have  gone  in  extending  the  field  of  invest- 
ments, a  list  of  securities  which  are  legal  in  those  states  has 
also  been  added.  Although  the  list  may  be  revised  slightly 
from  time  to  time,  the  securities  named  are  standard  and  are, 
with  a  few  exceptions,  likely  to  remain  legal. 

Lack  of  uniformity  in  the  laws  of  the  various  states  is  not- 
able, and  the  work  will  justify  itself  if  it  affords  a  present 
guide  for  the  proper  investment  of  trust  funds  and  at  the  same 
time  indicates  the  necessity  for  uniform  laws  on  the  subject 
and  the  creation  of  reliable  sources  of  information  for  the 
benefit  of  trustees. 

The  need  for  such  a  book  has  been  evident  in  connection 
with  the  preparation  of  the  legal  discussions  for  Trust  Com- 
panies Magazine,  and  the  author  wishes  to  express  his  appre- 
ciation for  valuable  suggestions  made  by  the  editor  of  Trust 
Companies  Magazine,  and  Mr.  Orrin  R.  Judd,  Assistant  Trust 
Officer  of  the  Columbia-Knickerbocker  Trust  Company. 

59  Wall  Street,  New  York. 
May  25,  1914. 


CONTENTS. 

PAQH 

INTRODUCTION          ...........  vii 

PAKT    I. 

GENERAL  PRINCIPLES 1 

Investments  legal  in  all  states  .         .        .        .        .        .        .  9 

Investments  not  legal  in  all  states 10 

PAET    II. 

STATE  LAWS  AND  DECISIONS 16 

Alabama        .         .         .        .         .        .        .         .         .        .        .16 

Alaska           ...........  18 

Arizona          ...........  19 

Arkansas 20 

California     ...........  22 

Colorado 38 

Connecticut            ..........  41 

Delaware       .         .         .         .        .         .         .        .        .        .        .61 

District  of  Columbia .65 

Florida 67 

-  Georgia 71 

Hawaii 75 

Idaho •. 77 

Illinois           .         .  i 79 

Indiana          ...........  83 

Iowa 87 

Kansas .        .90 

Kentucky 92 

Louisiana      ...........  96 

Maine 100 

Maryland      ...........  104 

Massachusetts       .         .         .         .        ...         .         .        .  121 

Michigan 145 

Minnesota 149 

Mississippi 153 

Missouri         ...........  155 

Montana        ...........  157 

Nebraska 159 


VI  CONTENTS. 

PAGE 

Nevada          ...........  161 

New   Hampshire   ..........  163 

New  Jersey 172 

New    Mexico 183 

New    York 184 

North  Carolina 197 

North  Dakota 200 

Ohio 202 

Oklahoma 209 

Oregon           ...........  211 

Pennsylvania         ..........  213 

Porto   Eico 220 

Ehode  Island 221 

South   Carolina 223 

South  Dakota 226 

Tennessee 228 

Texas    .                                   231 

Utah      .                                     234 

Vermont 236 

Virginia 241 

Washington           ..........  246 

West  Virginia       ..........  248 

Wisconsin      ...........  251 

Wyoming 256 

PART    III. 

TYPICAL  LIST  OF  LEGAL  INVESTMENTS 258 

Connecticut            ..........  260 

Massachusetts        ..........  281 

New    York    .....  300 


INTRODUCTION 

There  is  no  general  rule  governing  the  investment  of  trust 
funds  in  the  United  States.  The  trustee  must  look  to  the 
statutes  and  decisions  of  his  own  state  and  must  exercise  his 
best  judgment.  Too  frequently  the  laws  are  not  specific.  He 
is  then  told  to  act  in  good  faith  and  to  exercise  the  care  and 
prudence  which  the  average  man  would  exercise  in  his  own 
like  affairs.  But  at  the  same  time  he  may  exercise  this  care 
and  prudence  in  selecting  only  from  such  securities  as  are 
authorized  by  law.  Consequently,  no  matter  how  careful  and 
prudent  he  may  be,  he  runs  the  risk  of  loss  if  he  invests  in 
other  than  legal  securities. 

Neither  may  the  trustee  follow  the  laws  of  another  state 
as  his  guide.  The  fact  that  the  State  of  Massachusetts  per- 
mits investment  of  trust  funds  in  corporate  stock  is  no  argu- 
ment for  the  legality  of  such  an  investment  in  Wisconsin.  The 
fact  that  New  York  permits  a  trustee  to  invest  in  certain  rail- 
road bonds  is  no  argument  that  a  trustee  in  New  Mexico  may 
follow  the  New  York  rule.  An  investment  in  securities  which 
are  legal  in  other  states  may  be  evidence  of  the  good  faith 
and  diligence  of  the  trustee,  but  it  is  not  a  complete  defense 
for  the  legality  of  the  investment.  The  general  impression, 
therefore;  that  an  investment  which  is  legal  in  New  York,  or 
the  New  England  states,  is  also  legal  in  the  western  states  is 
false,  for  the  western  states  have  adopted  the  strict  old  Eng- 
lish rule  more  frequently  than  the  Massachusetts  rule. 

A  common  illustration  of  the  lack  of  uniformity  on  the  sub- 
ject and  of  the  futility  of  attempting  to  formulate  general 
rules  is  the  diversity  of  statutes  and  decisions  as  to  the  right 
of  a  trustee  to  continue  investments  which  have  been  made 
by  the  creator  of  the  trust.  Many  well-informed  trustees  think 
that  it  is  proper  to  continue  investments  which  were  made  by 
the  creator  of  the  trust,  whether  such  investments  are  legal 
for  trustees  or  not.  In  some  of  the  states  this  is  the  law ;  but 
in  others  it  is  the  duty  of  the  trustee  to  call  in  so  much  of 


Vlll  INTRODUCTION. 

the  estate  as  is  not  invested  in  authorized  securities  and  con- 
vert it  into  investments  which  are  legal.  The  states  which 
permit  the  trustee  to  continue  investments  do  so  on  the  theory 
that  the  creator  of  the  trust  intended  his  own  selections  to 
remain.  On  the  other  hand,  the  states  which  require  the  trustee 
to  call  in  the  estate  do  so  on  the  theory  that  in  selecting  the 
trustee  the  creator  of  the  trust  placed  special  confidence  in 
him  and,  in  the  absence  of  specific  authorization,  intended  that 
he  should  execute  the  trust  in  accordance  with  the  law  gov- 
erning investments. 

It  is  evident,  therefore,  that  a  trustee  must  look  to  the 
laws  of  his  own  state  in  deciding  upon  proper  investments. 
But  the  discussion  of  general  principles,  which  precedes  the 
statement  of  the  statutes  and  decisions  of  the  various  states, 
will  be  found  helpful  where  a  state  has  not  provided  definite 
rules  for  the  guidance  of  trustees. 

"We  mention  briefly  the  law  of  England  relating  to  invest- 
ments of  trust  funds,  because  the  rules  which  have  been 
adopted  by  the  various  states  have  as  their  basis  the  principles 
which  were  worked  out  by  the  English  courts  of  equity,  and 
because  England  has  adopted  a  uniform  law  governing  the 
investment  of  trust  funds.  At  one  time  the  English  courts 
were  liberal  in  their  treatment  of  trustees,  permitting  them  to 
invest  even  in  personal  securities  where  it  was  shown  that  the 
trustee  had  exercised  due  diligence.  But  later  the  rules  were 
restricted  and  it  was  even  doubted  whether  a  trustee  could 
safely  invest  in  mortgage  security.  Finally,  in  a  leading  case, 
Sir  George  Jessel  said  that,  "A  trustee  ought  to  conduct  the 
business  of  the  trust  in  the  same  manner  that  an  ordinary 
prudent  man  of  business  would  conduct  his  own."  This  was 
the  general  rule,  and  in  the  application  of  this  rule  the  courts 
restricted  the  trustee,  in  his  choice  of  investments,  to  govern- 
ment securities  and  first  mortgages  on  real  estate. 

At  last  the  English  Trust  Investment  Act  of  1889  was 
passed,  prescribing  definitely  the  securities  in  which  a  trustee 
might  lawfully  invest.  With  but  few  changes,  made  to  suit 
changed  conditions,  the  act  remains.  The  second  reason,  then, 
for  discussing  briefly  the  English  law  is  that  it  indicates  how 


INTRODUCTION.  IX 

effectively  that  country  has  provided  a  simple  rule  for  trustees 
to  follow.  Instead  of  uncertainty — the  kind  of  uncertainty 
which  exists  in  many  of  our  states — there  is  a  well-defined 
guide.  A  list  of  investments,  sufficiently  extensive  and  yet 
safe,  allowing  the  trustee  plenty  of  latitude,  has  been  author- 
ized by  the  Trust  Investment  Act  of  England.  The  trustee 
is  not  compelled  to  guess  at  the  value  of  the  security  or  to 
take  another's  word  for  it.  His  problem  has  been  simplified. 

It  is  unnecessary  to  set  forth  the  English  act  in  detail,  but 
it  provides  for  investment  in  parliamentary  stocks  or  public 
funds;  real  or  inheritable  securities  in  Great  Britain  or  Ire- 
land ;  stock  of  the  Bank  of  England  or  of  the  Bank  of  Ireland ; 
India  stock;  any  securities,  the  interest  of  which  has  been 
guaranteed  by  Parliament;  consolidated  stocks  created  by  the 
Metropolitan  Board  of  Works,  or  debenture  stocks  created  by 
the  Receiver  for  the  Metropolitan  Public  District,  and  cer- 
tain railway  stocks  in  Great  Britain,  Ireland  and  India.  Defi- 
nite qualifications  which  a  railroad  must  possess  before  its 
stock  can  be  considered  as  an  investment  suitable  for  trustees 
are  stated  in  the  statute.  Provision  is  also  made  for  invest- 
ment in  certain  municipal  stock  and  the  stock  of  certain  city 
water  supply  companies. 

A  few  of  the  states  have  provided  for  investments  by  trus- 
tees in  a  similar  definite  form,  and  have  permitted  invest- 
ments in  railroad  bonds,  provided  the  road  has  fulfilled  certain 
requirements  as  to  financial  condition.  This  is  a  step  in  the 
right'  direction,  and  to  be  perfect  needs  but  the  addition  of 
a  reliable  source  of  information  regarding  the  roads  which 
fulfill  the  requirements  of  the  statute.  It  is  evident  that  if  a 
uniform  law  for  investment  of  trust  funds  were  passed  for 
all  of  the  states,  it  would  not  only  be  progressive  legislation, 
but  would  be  a  recognition  of  reforms  which,  for  twenty-five 
years,  have  proved  beneficial  to  the  large  number  of  trustees 
in  England.  Surely,  if  reference  to  the  English  law  on  the 
subject  does  no  more  than  stimulate  thought  it  will  have 
justified  this  brief  reference  to  it  in  a  book  which  is  to  set 
forth  the  laws  governing  the  investment  of  trust  funds  in  the 
United  States. 


PART   I. 
GENERAL    PRINCIPLES. 

1.  Necessity  of  Stating  General  Rules. 

Because  of  the  lack  of  uniformity  among  the  various  states 
as  to  investments  which  are  legal  for  trustees,  and  because 
many  states  have  not  formulated  definite  rules  governing 
trustees  in  their  investments,  it  is  necessary  to  set  forth,  as 
accurately  as  may  be,  the  investments  which  have  been  gen- 
erally recognized  as  legal  for  trustees  and  the  principles  which 
have  usually  been  applied  to  such  investments.  Some  of  the 
states,  either  by  statutes  or  court  decisions,  have  established 
rules  for  the  investment  of  trust  funds  which  are  fairly 
definite ;  others  have  gone  little  further  than  to  provide  that 
the  trustee  must  exercise  the  care  and  prudence  of  the  average 
person,  and  still  others  have  said  nothing  about  the  character 
of  investments  which  a  trustee  may  make.  But  this  does  not 
mean  that  in  the  states  where  the  law  is  unsettled,  the  trustee 
may  invest  trust  funds  as  he  pleases.  It  does  not  mean  that 
in  the  states  which  merely  prescribe  the  rule  of  "good  faith," 
the  trustee  may  frame  his  own  definition  of  "good  faith."  In 
such  states,  it  is  important,  therefore,  that  the  trustee  keep 
well  within  the  classes  of  investments  which  have  been  gen- 
erally recognized  as  legal.  Both  in  England  and  the  United 
States,  the  courts  have  agreed  upon  certain  investments  which, 
when  honestly  made,  relieve  the  trustee  from  liability  for  loss. 
When  in  doubt,  he  should  follow  these  rules,  although  they 
are  not  as  liberal  as  one  would  desire  in  this  day  of  increased 
opportunity  for  safe  investments. 

2.  Continuing  Investments  made  by  Creator  of  Trust. 

The  first  duty  of  a  trustee  is  to  call  in  the  estate  prepara- 
tory to  investment.     The  extent  to  which  he  must  go  in  call- 

1 


2  GENERAL   PRINCIPLES. 

ing  in  the  estate  and  converting  it  into  investments  which  are 
legal,  depends  upon  the  provisions  of  the  trust  instrument,  and 
the  law  of  the  state  in  which  he  acts.  The  instrument  itself 
may  authorize  him  to  continue  the  investments  made  by  the 
creator  of  the  trust,  or  the  law  of  the  state  may  authorize 
a  continuance  of  such  investments.  In  the  absence  of  one  or 
the  other  of  such  provisions,  it  is  the  duty  of  the  trustee  to 
call  in  the  estate  and  convert  investments  which  are  not  legal 
for  trustees  into  investments  which  are  legal.  In  the  absence 
of  specific  authority,  he  cannot  safely  continue  an  investment 
simply  because  it  was  made  by  the  creator  of  the  trust. 

The  authorities  are  divided  upon  the  question.  Of  the  few 
states  in  which  it  has  been  definitely  determined,  the  right 
to  continue  investments  is  recognized  in  Massachusetts,1  Con- 
necticut,2 New  Jersey,3  Kentucky,4  Illinois,5  New  Hampshire,6 
and  apparently  in  Delaware.7 

But  the  following  states  have  decided  that  the  investments 
made  by  the  creator  of  the  trust  afford  no  criterion  for  the 
trustee,  and  that  it  is  his  duty  to  call  in  the  estate  and  invest 
in  authorized  securities:  New  York,8  Pennsylvania,9  Ohio,10 
South  Carolina,11  Virginia,12  and  West  Virginia.13 

It  is  evident  that  in  states  where  there  are  no  statutes  or 
decisions  upon  the  question,  the  only  safe  course  for  the 
trustee  is  to  call  in  the  estate  and  invest  it  in  legal  securities. 


1  Harvard  College  v.  Amory,  26  Mass.  446. 

2  General  Statutes,  Sees.  255,  496.    State  v.  Washburn,  67  Conn.  187. 

3  Statutes,  1910,  Sec.  34. 

4  Fidelity  Trust  Co.  v.  Glover,  90  Ky.  355. 

s  Laws  of  1905.  Merchants  Loan  &  Trust  Co.  v.  Northern  Trust  Co., 
250  111.  86. 

e  Laws  of  1907,  ch.  16. 

•  Statutes  1895. 

s  Matter  of  Meyers,  131  X.  Y.  409;  Matter  of  Hirsch's  Estate,  116 
A.  D.  367;  Aff  Jd.  188  N.  Y.  584;  Cannon  v.  Quincy,  65  Misc.  399. 

»Skeer's  Estate,  236  Pa.  St.  404;  Bartol's  Estate,  182  Pa.  St.  407. 

10  Weyer  v.  Watt,  48  O.  S.  545. 

11  Nance  v.  Nance,  1  S.  C.  218;  Spear  v.  Spear,  9  Rich  Eq.  184. 

12  Miller  v.  Holcomb's  Ex'r.,  50  Va.  674,  but  the  rule  is  modified  in 
Patterson  v.  Horsley,  70  Va.  263  and  "Walkins  v.  Stewart,  78  Va.  111. 

is  Anderson  v.  Piercy,  20  W.  Va.  282. 


WORDING   OF   TRUST   INSTRUMENT.  O 

There  is  authority,  however,  for  the  rule  that  in  states 
where  there  are  no  fixed  funds  or  securities  in  which  trustees 
shall  invest,  "the  fact  that  a  testator  has  invested  his  prop- 
erty in  particular  stocks,  shares  of  corporations,  mortgages,  or 
other  securities,  thus  indicating  his  confidence  in  such  invest- 
ments, will  go  far  to  justify  the  trustees  in  continuing  them."1 

3.  Duty  to  Invest. 

A  trustee  may  not  permit  the  funds  to  lie  idle.  The  rule 
is  well  settled  that  he  must  invest  within  a  reasonable  time 
and  must  keep  the  funds  productive.  This  rule  applies  also 
to  any  interest  or  increase  which  comes  to  the  estate.  By 
negligently  permitting  the  fund  to  remain  idle  the  trustee 
renders  himself  liable  for  interest  at  the  legal  rate. 

4.  Must  Obey  Directions  in  Trust  Instrument. 

A  trustee  is  bound  to  follow  strictly  the  provisions  of  the 
trust  instrument.  If  the  creator  of  the  trust  specifies  the 
character  of  investments  to  be  made  and  the  security  to  be 
taken,  his  instructions  must  be  followed,  no  matter  what  the 
law  may  recognize  as  legal  investments.  He  may  direct  the 
trustee  to  continue  a  business  or  to  invest  without  security  of 
any  kind. 

/ 

5.  Wording  of  Trust  Instrument. 

The  instrument  creating  the  trust  frequently  provides  that 
the  funds  may  be  invested  by  the  trustee  in  accordance  with 
his  "best  judgment"  or  "within  his  discretion,"  or  as  he  shall 
deem  for  the  "best  interests  of  the  estate,"  or  in  "good 
and  safe  security."  The  courts  have  generally  decided  that 
the  use  of  such  terms  does  not  give  the  trustee  authority  to 
invest  in  unauthorized  securities.  Generally,  these  and  like 
terms  have  been  construed  to  mean  that  the  trustee  may  ex- 


i  Perry    on    Trusts,    Sec.    465.      Norwood,    Admr.,    v.    Harness,    98 
Ind.  134. 


4  GENERAL   PRINCIPLES. 

ercise   his   judgment    or    discretion   in   selecting   investments 
from  those  which  are  recognized  as  legal. 

Only  by  clear  and  specific  instructions  in  the  trust  instru- 
ment, and  not  in  general  terms,  can  a  trustee  be  justified  in 
investing  in  other  than  legal  securities. 

6.  Must  Exercise  Ordinary  Care  and  Prudence. 

The  most  common  rule  found  in  the  decisions  is  that  a 
trustee,  in  making  investments,  must  exercise  good  faith  and 
must  use  the  care  and  prudence  of  ordinary  men  of  affairs. 
This  sounds  easy,  but  it  is  not.  The  rule  has  been  defined 
and  limited  in  so  many  ways  that  a  trustee  cannot  be  safely 
governed  by  his  own  understanding  of  "care  and  prudence." 
For  instance,  he  might  very  well  believe  that  an  investment 
in  certain  corporate  bonds  would  be  an  exercise  of  the  greatest 
care  and  prudence,  but  the  courts  in  many  states  have  refused 
to  permit  such  investment  of  trust  funds.  Such  terms  as 
"care  and  prudence"  and  "good  faith"  do  not  apply  to  in- 
vestments generally,  but  merely  to  the  selection  by  a  trustee 
from  the  securities  which  are  legal. 

If,  after  exercising  ordinary  care,  he  selects  an  authorized 
investment  upon  which  there  is  ultimately  a  loss  to  the  estate, 
he  is  not  liable.  But  even  if  he  has  exercised  ordinary  care 
and  prudence  in  selecting  an  unauthorized  investment,  he  is 
not  protected  against  loss. 

7.  Disposition  of  Funds  Pending  Investment. 

A  trustee  is  allowed  a  reasonable  time  within  which  to 
invest  the  funds,  before  he  is  chargeable  with  interest.  What 
constitutes  a  reasonable  time  depends  on  the  circumstances  of 
each  case  and  the  availability  of  legal  securities.  Generally 
speaking,  a  trustee  should  not  permit  a  fund  to  remain  un- 
invested for  a  longer  period  than  six  months.  But  in  Vir- 
ginia and  West  Virginia  a  guardian  must  invest  within  thirty 
days. 

Pending  investment  a  trustee  may  deposit  the  funds  in  a 
bank  of  good  standing  in  his  name  as  trustee. 


CONSENT   OF   ADULT   BENEFICIARY.  0 

8.  Trustee  may  not  Profit  from  the  Estate. 

It  is  well  settled  that  a  trustee  may  not  obtain  any  per- 
sonal benefit  either  directly  or  indirectly  from  his  dealings 
with  the  trust  property.  He  is  entitled  to  lawful  com- 
missions and  to  compensation  for  his  services,  but  this  is  all 
he  should  be  allowed.  So  strictly  has  this  rule  been  applied 
that  the  courts  have  generally  decided  that  a  trustee  may  not 
purchase,  either  directly  or  indirectly,  at  a  sale  of  the  trust 
property,  and  may  not  represent  those  whose  interests  are 
adverse  to  the  beneficiaries.  It  is  evident,  therefore,  that  the 
only  safe  policy  for  a  trustee  is  to  have  no  personal  interest 
whatever  in  his  dealings  with  the  trust  funds. 

9.  Trust  Funds  must  be  Kept  Separate. 

Since  the  trustee  must  have  no  personal  interest  whatever 
in  his  dealings  with  the  trust  property,  it  follows  that  if  he 
would  pursue  a  safe  course  he  must  keep  the  trust  funds 
entirely  separate  from  his  own  money,  and  if  he  acts  as 
trustee  for  more  than  one  estate,  must  keep  each  fund  intact 
and  not  invested  in  common  with  the  others.  Occasionally 
there  has  been  an  exception  where  the  trustee  of  a  number 
of  small  funds  has  combined  them,  in  order  to  obtain  one  good 
mortgage.  And  there  seems  to  have  been  no  criticism  of  the 
practice  of  trust  companies  in  providing  for  investment  of 
small  funds  in  participating  mortgages.  In  fact,  at  least  one 
state1  has  provided  by  statute  for  this  form  of  investment. 

10.  Effect  of  Consent  of  Adult  Beneficiary. 

It  happens  occasionally  that  all  of  the  beneficiaries  of  a 
trust  are  of  full  age  and  under  no  legal  disabilities.  Where 
this  is  the  case,  the  trustee  may  invest  in  other  than  legal 
securities,  provided  he  obtains  the  consent  of  all  the  bene- 
ficiaries. While  it  is  true  that  the  beneficiaries  may  not  com- 
bine to  destroy  the  trust  estate  or  defeat  the  will  of  the 
creator  of  the  trust,  still  they  are  the  only  ones  who  may 


Ohio.     Sec.  9788  of  the  Code. 


6  GENERAL   PRINCIPLES. 

complain  of  a  loss  due  to  improper  investment,  and  if  they 
agree  upon  the  investment,  they  have  waived  the  right  to  hold 
the  trustee  responsible  for  loss.  But  before  such  an  invest- 
ment is  made,  the  trustee  should  obtain  the  written  consent 
of  the  beneficiaries. 

In  order  to  bind  a  beneficiary  by  acquiesence  in  an  un- 
authorized investment,  it  must  appear  that  he  knew  all  the 
facts,  and  was  apprised  of  his  legal  rights,  and  was  under  no 
disability  to  assert  them.  The  beneficiary  must  have  acted 
freely,  deliberately  and  advisedly,  with  the  intention  of  con- 
firming a  transaction  which  he  knew,  or  with  reasonable  dili- 
gence ought  to  have  known,  to  be  impeachable.  His  acquies- 
cence amounts  to  nothing  if  a  free  disclosure  of  every  cir- 
cumstance is  not  made  to  him,  or  if  his  right  to  impeach  the 
investment  is  concealed  from  him.  The  trustee  sustains  the 
burden  of  proof  and  he  must  show  that  all  the  beneficiaries 
are  competent  to  acquiesce,  and  that  all  have  consented.  Im- 
perfect information  amounts  to  concealment.  (White  v. 
Sherman,  168  111.  589.) 

11.  Vigilance  of  Trustee  Between  Time  of  Examining  Title  to 
Property  and  Making  a  Loan  upon  it  as  Security. 

It  has  sometimes  happened  that  a  trustee,  before  making 
a  loan  of  trust  funds  upon  property,  has  had  the  title  ex- 
amined for  encumbrances  a  few  days  prior  to  making  the  loan 
and  that  during  the  intervening  time  a  fraudulent  borrower 
has  encumbered  the  land.  In  such  a  case,  to  what  extent  is 
the  trustee  guilty  of  negligence? 

In  Slauter  v.  Favorite,  107  Ind.  291,  a  guardian  had  al- 
lowed ten  days  to  elapse  between  the  time  of  examining  the 
title  and  the  time  of  making  the  loan.  In  the  meantime,  the 
mortgagor  had  encumbered  the  property.  The  court  decided 
that  the  trustee  acted  in  good  faith  and  was  not  guilty  of 
negligence ;  that  a  lender  cannot  always  be  said  to  be  negli- 
gent if  he  does  not  watch  the  records  to  the  last  day  or 
hour  on  which  negotiations  are  closed. 

It  is  evident  that  the  case  was  decided  upon  the  broad 
rule  that  a  trustee  who  has  exercised  good  faith  should  be 


PARTICIPATING  MORTGAGES.  / 

protected.  While  negotiations  for  loans  may  often  be  in 
progress  for  several  days  before  they  are  concluded,  this  is 
no  excuse  for  failure  of  a  trustee  to  protect  the  estate.  We 
doubt,  therefore,  the  soundness  of  the  rule  in  the  Indiana 
case  and  are  convinced  that  although  a  trustee  may  not  be 
able  to  examine  a  title  down  to  the  last  minute  before  making 
a  loan,  he  can  at  least  take  such  precaution  that  the  bor- 
rower has  little  opportunity  to  perpetrate  a  fraud.  A  delay 
of  ten  days  after  examining  title  could  not  generally  be  con- 
sidered the  exercise  of  due  diligence. 

12.  Participating  Mortgages. 

A  general  practice  among  trust  companies .  is  to  invest  a 
number  of  small  trust  estates  in  a  common  mortgage  and  to 
issue  participating  certificates  to  the  various  beneficiaries. 
This  method  of  investment  is  not  only  safe,  but  it  is  also  ex- 
ceedingly advantageous  to  the  beneficiary  of  a  small  fund.  In 
New  York  City,  for  example,  where  real  estate  values  are 
high,  it  is  often  well-nigh  impossible  for  a  trustee  to  in- 
vest safely  a  small  estate  in  a  mortgage.  The  result  is  that 
if  he  is  bound  by  the  strict  rule  that  each  trust  fund  must  be 
kept  entirely  separate  from  every  other  fund,1  he  may  be  put 
to  great  inconvenience  and  many  small  estates  may  remain 
unproductive  for  long  periods  of  time.  In  answer  to  this  it 
may  be  said  that  the  trustee  is  bound  to  exercise  due  diligence 
in  obtaining  proper  securities ;  but  it  must  also  be  remembered 
that  he  is  allowed  a  reasonable  time  within  which  to  obtain 
such  securities,  and  that  eighteen  months  has  been  held  not 
to  be  an  unreasonable  time.  Under  the  practice  adopted  by 
trust  companies  these  small  estates  are  invested  at  once  and 
are  kept  continually  productive. 

Although  this  particular  method,  of  investment  does  not 
appear  to  have  been  passed  upon  by  the  courts,  it  is  reason- 
ably safe  to  say  that  if  the  question  arises  the  practice  will 


i  Doud  v.  Holmes,  63  N.  Y.  635;  McCullough  v.  McCullough,  44  N.  J. 
Eq.  313;  Lewin  on  Trusts,  Vol.  I,  p.  331;  Perry  on  Trusts,  Vol.  I,  Sec.  463. 


8  GENERAL   PRINCIPLES. 

be  sustained.  One  case,  at  least,  has  gone  so  far  as  to  pro- 
tect a  trustee  who  mingled  a  small  trust  fund  with  his  own 
funds  in  order  to  obtain  a  good  mortgage.1 

In  another  case  a  guardian  was  permitted  to  make  a  loan 
on  the  joint  account  of  two  wards.2 

It  is  suggested  that  this  highly  desirable  method  of  deal- 
ing with  trust  funds  be  settled  beyond  the  peradventure  of  a 
doubt  by  a  statute  giving  trust  companies  the  power  to  in- 
vest a  number  of  trust  estates  in  a  single  mortgage,  where 
such  an  investment  would  be  to  the  best  interests  of  the  estate. 
Such  a  statute  exists  in  Ohio  3  and  California.4 

INVESTMENTS  LEGAL  IN  ALL  STATES 

It  has  been  aptly  stated  that,  "the  trustee  has  not,  in 
this  country,  the  advantage  of  a  precise  standing  rule,  which 
has  been  long  since  adopted  by  the  English  Courts,  indicating 
particular  securities  as  safe  ones,  in  the  choice  of  which  the 
trustee  will  be  protected  against  loss."  (Kimball  v.  Reding, 
31  N.  H.  352,  374.) 

But  there  are  certain  classes  of  investments  recognized  as 
legal  in  all  of  the  states,  and  as  long  as  a  trustee  exercises 
common  intelligence  and  deals  honestly,  he  is  protected  from 
loss  when  he  invests  the  funds  in  these  securities.  \Yhen 
the  trust  instrument  does  not  direct  the  securities  in  which 
the  funds  may  be  invested  and  when  there  are  neither  state 
statutes  nor  court  decisions  to  guide  a  trustee,  his  safest  plan 


1  Graves'  Appeal,  50  Pa>.  St.  189. 

2  Nance  v.  Nance,  1  S.  C.  209. 

s  Sec.  9788  of  the  Ohio  Code  provides: 

"In  the  management  of  money  and  property  held  by  it  as  trustee, 
under  the  power  conferred  in  the  foregoing  sections,  such  trust  com- 
pany may  invest  them  in  a  general  trust  fund  of  the  corporation.  But 
the  authority  making  the  appointment,  upon  conferring  it,  may  direct 
whether  such  money  and  property  shall  be  held  separately  or  invested 
in  a  general  trust  fund. of  the  corporation;  except  that  such  corporation 
shall  follow  and  be  governed  by  all  directions  contained  in  any  instru- 
ment under  which  it  acts." 

*  Savings  Bank  Law,  Sec.  67. 


INVESTMENTS  LEGAL  IN  ALL  STATES. 

is  to  invest  in  some  of  the  following  securities  which  are  uni- 
versally recognized  as  legal  for  trustees : 

1.  Public  Securities. 

United  States  bonds  and  state  and  county  bonds  of  the 
state  where  the  trust  is  created  are  legal  investments  for 
trust  funds  in  all  jurisdictions.  The  difficulty  is  that  these 
bonds  pay  a  low  rate  of  interest  and  are  not  always  readily 
obtainable.  As  a  general  rule  a  trustee  may  invest  in  bonds 
issued  by  other  states,  but  there  are  a  few  exceptions. 

2.  First  Mortgages  on  Real  Estate. 

Although  there  was  some  doubt  in  the  early  English  de- 
cisions, it  is  now  the  universal  rule  that  a  trustee  may  invest 
in  first  mortgages  on  unencumbered  real  property.  He  must 
see  that  the  title  to  the  property  is  good ;  that  the  property  is 
located  in  the  state  where  the  trust  is  to  be  administered*; 
that  the  mortgage  is  a  first  lien  upon  the  property ;  that  a  fair 
appraisal  of  the  value  of  the  property  has  been  made,  and 
that  the  amount  invested  does  not  exceed  sixty-six  and  twc 
thirds  per  centum  of  the  appraised  value.  Some  of  the  au- 
thorities make  a  distinction  between  "improved"  and  "unim- 
proved" property  and  require  that  a  trustee  may  not  invest 
an  amount  in  unimproved  property  which  shall  exceed  from 
forty  to  fifty  per  centum  of  its  fair  value.  This  distinction 
should  be  observed,  for  improved  property  is  more  desirable 
as  an  investment  than  unimproved  or  vacant  land.  But  in 
neither  case  have  the  courts  been  strict  in  figuring  exact  per- 
centages, provided  the  trustee  has  exercised  good  faith  and 
approximated  the  "sixty-six  and  two-thirds  per  cent  rule."  In 
other  words,  a  trustee  is  allowed  considerable  latitude  in  select- 
ing such  an  investment,  for  the  courts  have  not  agreed  upon  a 
definite  percentage,  the  "sixty-six  and  two-thirds  per  cent" 
rule  being  statutory  in  some  states  and  not  in  others.  It  can  be 
accepted,  however,  as  a  fairly  uniform  standard.  It  should  be 
added  that  although  a  mortgage  on  unimproved  property  is  a 
legal  investment,  it  is  not  generally  considered  advisable, 
unless  the  land  is  actually  producing  an  income. 


10  GENERAL  PRINCIPLES. 

INVESTMENTS  NOT  LEGAL  IN  ALL  STATES. 

1.  Municipal  Bonds. 

Perhaps  it  is  hardly  accurate  to  classify  municipal  bonds 
under  investments  which  are  not  generally  considered  legal, 
for  most  of  the  states,  as  we  shall  see  later,  have  specifically 
authorized  such  investments  and  when  municipal  bonds  are 
legally  issued  they  are  practically  as  safe  as  public  securities. 
It  is  also  true  that  if  a  trustee,  in  the  exercise  of  good  faith, 
invests  in  apparently  safe  municipal  bonds  the  courts  will 
generally  protect  him  against  loss.  But  even  so,  in  drawing  a 
dividing  line  between  investments  which  are  unquestionably 
legal  in  all  of  the  states  and  those  which  may  or  may  not  be 
legal,  it  is  necessary  to  classify  municipal  bonds  under  the 
latter. 

2.  Corporate  Bonds. 

The  question  of  the  right  of  a  trustee  to  invest  in  cor- 
porate bonds  is  likewise  not  easily  answered.  In  the  first 
place,  many  of  the  states,  recognizing  the  safety  of  the  first 
mortgage  bonds  of  standard  corporations,  have  provided  by 
statute  for  investment  of  trusts  funds  in  such  security.1 

In  the  second  place,  the  first  mortgage  bonds  of  long  estab- 
lished corporations  are  becoming  more  and  more  desirable 
as  investments.  This  is  especially  true  in  the  large  cities 
where  it  is  frequently  difficult  for  a  trustee  to  place  a  small 
fund  in  first  mortgages  on  real  estate.  Moreover,  the  states 
which  follow  the  "good  faith"  rule  and  which  have  not  ex- 
pressly provided  for  such  investments  by  statute  would  prob- 
ably protect  a  trustee  who  selected  the  first  mortgage  bonds 


i  California,  Code  of  1909,  Art.  V,  Sec.  105;  Connecticut,  Statutes 
of  1905;  Colorado,  Statutes  of  1891,  See.  36;  Delaware,  Laws  of  1909; 
Illinois,  Laws  of  1905;  Kentucky,  Statutes  of  1909,  Sec.  4168;  Louisiana, 
Statutes  of  1904,  Sec.  8  of  Savings  Bank  Law;  Massachusetts,  by  im- 
plication, Sec.  17  of  Trust  Company  Law;  Minnesota,  Statutes,  Sec. 
6393;  New  Hampshire,  Laws  of  1907,  ch.  15  Sec.  1  and  ch.  114  Sec.  1; 
New  York  Savings  Bank  Law,  Sec.  239;  New  Jersey,  Statutes  1910,  Sav- 
ings Bank  Law,  Sec.  33;  Tennessee,  Statutes  of  1903,  ch.  377;  Vermont, 
Statutes,  Sec.  4654;  Wisconsin,  Laws  of  1909,  ch.  462. 


INVESTMENTS   NOT   LEGAL   IN   ALL   STATES.  11 

of  a  leading  railroad  corporation.  And  yet,  corporate  bonds 
must  be  classified  as  investments  not  legal  in  all  of  the  states. 
In  fact,  two  states,1  by  their  constitutions,  prohibit  invest- 
ments by  trustees  in  stocks  and  bonds  of  private  corporations. 
Naturally,  the  states  which  permit  a  trustee  to  continue 
the  investments  made  by  the  creator  of  the  trust,  would  per- 
mit him  to  retain  stocks  and  bonds  of  private  corporations; 
but  this  exception  applies  to  all  the  general  rules  herein 
stated,  to  the  same  extent  as  the  exception  that  no  matter 
what  the  legal  requirements,  a  trustee  is  bound  by  the  pro- 
visions of  the  trust  instrument  or  an  order  of  court. 

3.  Corporate  Stock. 

There  can  be  no  question  regarding  the  general  rule  gov- 
erning investments  by  trustees  in  corporate  stock.  "With  a 
few  exceptions,2  notably  Massachusetts,  none  of  the  states 
permit  trustees  to  invest  trust  funds  in  the  stock  of  private 
corporations.  And  even  where  an  exception  is  made,  the 
trustee  is  not  permitted  to  invest  too  large  a  portion  of  the 
estate  in  such  security.3 

It  is  also  true  that  where  the  trustee  is  given  wide  dis- 
cretion by  the  trust  instrument,  he  may  be  permitted  to  in- 
vest in  corporate  stock,4  but  the  general  rule  is  that  stocks 
of  private  corporations  are  not  legal  investments  for  trust 
funds.5 


1  Pennsylvania   and  Colorado. 

2  Harvard  College  v.  Amory,  26  Mass.  446;  Green  v.  Crapo,  181  Mass. 
55;   Sheffield  v.  Parker,  158  Mass.   330;   Scoville  v.  Brock,  81  Vt.  405; 
McCoy  v.  Horwitz,  62  Md.  183. 

3  Appeal  of  Dickinson,  152  Mass.  184. 
*  Willis  v.  Braucher,  79  O.  St.  290. 

5  In  re  Potter's  Appeal,  56  Conn.  1;  Eeed  v.  Eeed,  80  Conn.  401; 
Tucker  v.  State,  72  Ind.  242;  Gilbert  v.  Welsch,  75  Ind.  557;  Mattocks  v. 
Moulton,  84  Me.  545;  Cropsey  v.  Johnston,  137  Mich.  16;  Estate  of 
Millenovich,  5  Nev.  161;  Kimball  v.  Keding,  31  N.  H.  352;  Stevens  v. 
Meserve,  73  N.  H.  293;  Gray  v.  Fox,  1  N.  J.  Eq.  259;  Ward  v.  Kitchen, 
30  N.  J.  Eq.  31;  King  v.  Talbot,  40  N.  Y.  76;  Matter  of  Hall,  164  N.  Y. 
196;  Eoach's  Estate,  50  Oregon  179;  Commonwealth  v.  McConnell,  226 
Pa.  244;  Allen  v.  Gaillard,  1  S.  C.  279;  Womack  v.  Austin,  1  S.  C.  421. 


12  GENERAL   PRINCIPLES. 

4.  Personal  Securities. 

Although  in  a  few  exceptional  cases,  trustees  who  invested 
the  trust  funds  by  lending  to  individuals  without  additional 
security,  have  been  protected,  the  exceptions  are  so  rare  that 
they  are  negligible.  In  the  absence  of  specific  authorization 
in  the  trust  instrument,  a  trustee  should  never  lend  the  funds 
upon  mere  personal  security.  If  he  does  so,  he  may  expect  to 
bear  whatever  loss  results  to  the  estate,  not'  to  mention  the 
possibility  of  more  serious  consequences.  And  this  is  the 
rule,  no  matter  what  the  financial  standing  of  the  borrower 
at  the  time  the  loan  was  made. 

5.  Second  Mortgages. 

The  decisions  which  approve  the  investment  of  trust  funds 
in  a  second  mortgage  are  rare  indeed.  One  leading  case1 
seems  to  have  sanctioned  such  an  investment,  but  the  rule  is 
well-nigh  universal  that  a  trustee  who  invests  in  a  second 
mortgage  is  liable  for  any  loss  to  the  estate.2 

6.  Investment  in  Securities  in  other  State's. 

The  general  rule  is  that  a  trustee  must  invest  in  securities 
which  are  located  in  the  state  where  the  trust  is  to  be  ad- 
ministered. The  reason  given  for  the  rule  is  that  the  courts 
which  must  enforce  the  trust  should  have  jurisdiction  over 
the  subject  of  the  trust.  But  there  are  exceptions,  some  of 
the  states  permitting  trustees  to  invest  in  a  limited  way  in 
other  states3  and  others  allowing  the  practice  in  particular 
cases.4 


1  Taft  v.  Smith,  186  Mass.  31. 

2  Mattocks  v.  Moulton,  84  Me.  545;   Gilbert  v.  Kolb,  85  Md.  627; 
Gilmore  v.  Tuttle,  32  N.  J.   Eq.  611;   Mulford  v.  Mulford,  53   Atl.  Eep. 
79;  Shuey  v.  Latta,  90  Ind.  136;  Makin's  Estate,  20  Pa.  C.  C.  587;  In  re 
Spencer's  Appeal,  2  O.  Dec.  Eep.   510. 

s  Laws  of  Massachusetts,  1910  ch.  411  Sec.  14;  Statutes  of  New 
Hampshire,  1907  ch.  114  Sec.  1;  Laws  of  Illinois,  1905. 

*Denton  v.  Sanford,  103  N.  Y.  607;  Bidley  v.  Dedman,  134  Ky.  146, 
where  it  was  to  the  advantage  of  the  beneficiary;  Thayer  v.  Dewey,  185 
Mass.  68,  where  the  fund  came  to  the  trustee  so  invested;  Stevens  v. 
Meserve,  73  N.  H.  293;  Gouldley's  Estate,  201  Pa.  St.  491,  where  the 


INVESTMENTS   NOT   LEGAL   IN   ALL   STATES.  13 

But  the  weight  of  authority  is  against  the  right  of  a  trustee 
to  go  beyond  his  own  state  to  secure  investments.1 

In  the  absence,  therefore,  of  specific  authority,  either  in 
the  trust  instrument  or  by  statute,  a  trustee  would  not  be 
safe  in  placing  the  trust  funds  in  securities  which  are  beyond 
the  jurisdiction  of  the  court.  Naturally,  this  rule  does  not 
apply  where  the  statutes  of  a  state  permit  investments  in  rail- 
road bonds  and  bonds  of  municipalities  in  other  states. 

7.  Purchasing  Real  Estate. 

A  trustee  has  no  power,  unless  authorized  by  the  instru- 
ment creating  the  trust,  to  purchase  land  with  the  trust  fund 
unless  it  is  necessary  for  the  protection  of  the  beneficiaries. 
And  even  then,  the  only  safe  course  is  to  obtain  an  order  of 
court  authorizing  the  purchase.  In  one  of  the  leading  cases, 
where  the  estate  owned  an  undivided  half  interest  in  land,  the 
court  went  so  far  as  to  say  that  it  was  the  duty  of  the 
trustee  to  purchase  the  other  half  and  thus  protect  the  estate. 
(Pine  v.  White,  175  Mass.  585.) 

Where  it  is  necessary  for  a  trustee  to  buy  in  at  a  mortgage 
foreclosure,  this  is  not  considered  a  purchase  of  property 
with  trust  funds.  In  such  a  case  the  land  taken  becomes  in 
effect  personal  property  and  may  be  accounted  for  as  such. 

8.  Certificates  of  Deposit. 

Although  a  trustee  may  deposit  trust  funds  in  a  reputable 
bank  for  a  reasonable  time  while  he  is  securing  legal  invest- 
ments, the  general  rule  seems  to  be  that  he  may  not  invest 
the  funds  in  certificates  of  deposit.  The  average  trustee  is 
likely  to  think  that  he  may  keep  the  fund  on  deposit  in  a 
savings  bank  where  it  draws  a  fairly  good  rate  of  interest. 


court  allowed  a  Pennsylvania  trustee  to  invest  in  Camden,  New  Jersey. 
But  this  was  because  of  the  proximity  of  Camden.  The  rule  would  not 
be  extended.  Eobert's  Estate,  22  Pa.  C.  C.  4;  Bush's  Estate,  12  Pa. 
St.  375. 

1  In  re  Potter's  Appeal,  56  Conn.  1;  Clark  v.  Beers,  61  Conn.  87; 
McCullough  v.  McCullough,  44  N.  J.  Eq.  313;  Collins  v.  Gooch,  97  N.  C. 
186;  Pabst  v.  Goodrich,  133  Wis.  43;  Ormiston  v.  Olcott,  84  N.  Y.  339. 


14  GENERAL   PRINCIPLES. 

But  deposits,  whether  made  in  a  savings  bank,  trust  com- 
pany, or  bank,  are  not  proper  as  a  permanent  investment.1 

There  are  a  few  contrary  cases.  For  example,  it  has  been 
decided  that  a  trustee  may  invest  in  the  certificate  of  deposit 
of  a  national  bank,2  and  that  a  trust  company  may  make  a 
deposit -in  its  savings  department,3  although  it  may  not  invest 
in  its  own  certificates  of  deposit.4  The  case  of  Twittz  v. 
Houser,5  seems  to  permit  a  trustee  to  deposit  in  a  savings 
bank  as  an  investment. 

9.  Trade  or  Business — Continuing  Business. 

The  rule  is  well  settled  in  all  of  the  states  that  a  trustee 
may  not  invest  trust  funds  in  a  trade  or  business.  Such  an 
investment  would  be  mere  speculation,  and  the  law  is  strict 
in  prohibiting  the  use  of  trust  funds  in  a  business  chance 
which  may  fail.  Even  Massachusetts,  where  the  laws  govern- 
ing the  investments  of  trust  funds  are  liberal,  does  not  ap- 
prove of  such  investments.  (Trull  v.  Trull,  95  Mass.  407.)  And 
although  a  few  of  the  states  permit  a  trustee  to  continue  the 
investments  made  by  the  creator  of  the  trust,  whether  they 
are  authorized  or  not,  none  of  the  states  permit  a  trustee  to 
continue  a  business,  unless  there  is  specific  authority  in  the 
trust  instrument  so  to  do. 

In  the  absence  of  such  authority  or  an  order  of  court,  it 
is  the  duty  of  a  trustee  to  close  out  a  business  within  a  rea- 
sonable time  and  invest  the  proceeds  in  legal  securities. 

Many  a  trustee  has  fallen  into  error  in  attempting  to 
carry  on  the  business  of  an  estate,  and  has  done  so  innocently. 
Where  the  business  is  prosperous,  he  has  reasoned  that  since 
he  is  the  representative  of  the  estate  and  has  taken  the  place 


1  Estate    of  Wood,   159    Cal.   466;    Allen    v.   Leach,   7   Del.   Ch.   83; 
In  re  Gramel's  Estate,  120  Mich.  487;   Collins  v.  Gooch,  97  N.  C.  186; 
Baer's  Appeal,  127  Pa.  360;  Frankenfield 's  Appeal,  11  W.  L.  N.   (Pa.) 
373. 

2  Appeal  of  Hunt,  141  Mass.  515. 

3  Tucker  v.  New  Hampshire  Trust  Co.,  69  N.  H.  187. 

4  St.  Paul  Trust  Co.  v.  Kittson,  62  Minn.  408. 
s  7  S.  C.  164. 


INVESTMENTS   NOT   LEGAL   IN   ALL   STATES.  15 

of  the  owner  of  the  business,  he  should  continue  that  which  is 
profitable  to  the  estate.  Logical  as  this  may  appear  to  be, 
the  legal  situation  is  that  the  creator  of  the  trust  has  placed 
special  confidence  in  his  trustee.  Had  he  desired  the  trustee 
to  continue  the  risks  of  business,  he  would  have  so  provided  in 
the  trust  instrument. 

In  the  absence  of  such  express  authorization  to  continue  a 
business  or  to  invest  in  a  business,  the  trustee  is  without 
power  thus  to  employ  the  trust  estate.  The  creator  of  the 
trust  may  have  been  a  venturous  speculator,  but  it  does  not 
follow  that  his  trustee  may  take  business  risks. 


PART    II. 
STATE   LAWS   AND   DECISIONS. 

ALABAMA. 

TRUSTEES    GENERALLY. 

Code    of   1907. 
(With   Amendments   to   1914.) 

Sec.  6076.  Trustees  may  invest  in  State  or  United  States 
Securities. — A  trustee,  having  moneys  to  invest  or  lend,  may 
invest  them  in  the  purchase  of  the  interest-bearing  securities 
of  the  State,  or  of  the  United  States ;  but  for  such  investment 
his  liability  is  governed  by  the  general  rules  of  the  law. 

Sec.  6077.  Investment  without  the  State. — If  the  cestuis 
que  trust,  or  any  of  them,  reside  without  the  State,  and  the 
trustee  has  funds  to  lend  or  invest,  the  loan  or  investment 
whereof  in  the  State  of  their  residence  is  desirable,  the  trustee 
may  there  lend  and  invest  them,  under  the  authority  of  a 
decree  of  the  Court  of  Chancery. 

Sees.  4376,  4395,  4411.  Investments  by  Guardians. — It  is 
the  duty  of  the  guardian  to  manage  the  estate  of  the  ward 
frugally,  and  to  improve  it  to  the  best  of  his  skill  and  ability. 
He  must,  if  practicable,  lend  out  all  surplus  money  of  the  ward 
on  bond  and  mortgage,  or  on  good  personal  security,  and,  if 
the  bond  is  not  renewed  annually,  require  the  interest  to  be 
paid  at  the  end  of  each  year. 

Guardians  may  invest  the  money  of  their  wards  in  real 
estate  situated  in  any  part  of  the  State;  and  the  guardian, 
acting  in  good  faith,  shall  not  be  individually  responsible  for 
a  depreciation  in  value  of  the  land  purchased  with  the  funds 
of  the  ward,  when  such  depreciation  may  result  from  causes 
which  cannot  be  prevented  by  the  guardian. 

16 


ALABAMA.  17 

• 

The  court  of  probate  may  authorize  the  guardian  to  sell 
any  property  of  the  ward  and  direct  the  investment  of  the 
proceeds  in  bonds,  notes  or  bills  of  exchange  at  interest  on 
mortgage  security,  or  in  other  property  or  securities,  in  the 
name  of  the  ward. 

Note. — There  seems  to  be  an  inconsistency  between  the  statutes  gov- 
erning investments  by  trustees  and  the  statutes  providing  for  invest- 
ments by  guardians.  The  former  are  required  to  invest  in  government 
securities.  They  would  also  be  protected  if  an  investment  were  made 
in  first  mortgages  on  real  estate  in  accordance  with  the  general  rule. 
The  latter,  it  seems,  may  invest  in  personal  security.  But  guardians 
are  subject  to  the  directions  of  the  probate  court,  and  it  is  evidently 
the  intention  of  the  statute  that  their  investments  be  made  accordingly. 
Perhaps  this  accounts  for  the  apparent  inconsistency.  In  any  case,  the 
safe  policy  for  the  trustee  is  to  invest  in  government  securities  or  first 
mortgages  on  real  estate. 

Must  Take  Title  in  Name  of  Beneficiary. 

A  guardian  may  invest  the  funds  of  his  ward  in  real  estate,  as  the 
statute  provides,  but  the  title  must  be  taken  in  name  of  the  ward. 
Bobinson  v.  Pebworth,  71  Ala.  240.  And  the  guardian  is  liable  if  he 
takes  property  with  a  defective  title.  Scott  v.  Beeves,  131  Ala.  612. 

Trustee  May  Not  Deal  With  Trust  Property  For  His  Own  Benefit. 

The  trustee  is  not  permitted  to  traffic  for  his  own  benefit  in  prop- 
erty which  he  holds  in  trust;  and  if  he  does  so  the  beneficiary  may 
«laim  the  profit.  Hughes  v.  Hughes,  87  Ala.  652;  Penny  v.  Jackson,  85 
Ala.  67;  Pearce  v.  Gamble,  72  Ala.  341;  James  v.  James,  55  Ala.  525. 

He  may  not  loan  to  himself  on  note  and  mortgage  and  he  must  not 
mingle  trust  funds  with  his  own.  De  Jarnette  v.  De  Jarnette,  41 
Ala.  708. 

Purchase  by  Trustee  at  Sale. 

A  purchase  of  trust  property  by  a  trustee  at  his  own  sale  is  voidable 
at  the  option  of  the  beneficiary,  but  executors  and  administrators  who 
have  an  interest  in  the  property  sold  may  purchase  at  a  sale  of  the 
•estate  provided  there  is  no  unfairness.  Bank  of  Wetumpka  v.  Walkley, 
169  Ala.  648. 

Carrying  on  Business  of  Testator. 

A  trustee  has  no  authority  to  carry  on  the  business  of  the  creator 
•of  the  trust  unless  the  power  to  do  so  is  expressly  given  by  the  trust 
instrument.  National  Bank  v.  Manassas,  124  Ala.  379. 


ALASKA. 

Code. 

Sec.  866.  Executors  and  Administrators. — This  section 
provides  that  executors  and  administrators  shall  not  make 
any  profit  by  the  increase  in  value  of  the  estate,  or  suffer  loss 
by  the  decrease  in  value,  without  their  fault.  They  shall  not 
purchase  any  claim  against  the  estate. 

Guardians. — Guardians  are  subject  to  the  supervision  of 
the  Commissioners,  and  must  invest  the  funds  of  the  ward  in 
real  estate  or  in  such  securities  as  the  Commissioner  directs. 
Code,  Sec.  905. 

Deposit  in  Bank. — A  guardian  who  deposits  the  funds  of  the  ward 
in  a  reputable  bank  pending  investment  is  not  liable  for  loss,  but  if  he 
deposits  the  fund  for  a  fixed  time  and  accepts  a  certificate  of  deposit, 
this  amounts  to  an  investment  and  he  is  personally  responsible.  Corcoran 
v.  Kostrometinoff,  164  Fed.  685. 

Order  of  Court. — An  order  of  court  will  protect  a  guardian  in  his  in- 
vestments. So  held  where  a  guardian  deposited  funds  in  a  bank  under 
an  order  of  court.  In  re  Guardianship  of  Corcoran,  3  Alaska  263. 

Trustee  may  not  Obtain  Personal  Advantage. — A  trustee  may  not 
obtain  any  personal  advantage  in  his  management  of  the  estate.  Moore 
v.  Moore,  1  Alaska  225. 


18 


ARIZONA. 

There  are  no  statutes  or  decisions  by  the  higher  courts 
governing  investments  by  trustees.  Sections  1990,  1998  and 
2000,  of  the  Revised  Statutes,  relating  to  guardians,  provide 
that  a  guardian  must  manage  the  estate  of  his  ward  "frugally 
and  without  waste."  When  it  seems  advisable  to  sell  prop- 
erty of  the  ward  and  invest  the  proceeds,  this  may  be  done, 
provided  a  court  order  is  obtained.  "When  a  sale  is  made, 
the  guardian  ' '  must  make  the  investment  according  to  his  best 
judgment,  or  in  pursuance  of  any  order  that  may  be  made 
by  the  probate  court." 

A  trustee  who  would  invest  safely,  therefore,  is  limited  by 
the  general  rules  stated  in  Part  I. 


19 


ARKANSAS. 

Kirby's    Statutes    of    1904. 
(With   Amendments   to   1914.) 

Sec.  103.  Executors  and  Administrators. — If,  on  the  re- 
turn of  any  inventory,  or  at  any  other  time,  it  shall  appear 
to  the  satisfaction  of  the  court  that  there  is  a  surplus  of 
money  in  the  hands  of  any  executor  or  administrator  that 
will  not  shortly  be  required  for  the  expenses  of  administration 
or  the  payment  of  debts,  such  court  shall  have  discretionary 
power  to  order  the  executor  or  administrator  to  lend  out  such 
money  on  such  time  and  on  such  security  as  may  be  approved 
by  the  court. 

Sec.  104.  All  interest  received  by  executors  and  adminis- 
trators shall  be  assets  in  their  hands;  and  if  they  lend  the 
money  of  the  deceased,  or  use  it  for  their  private  purposes, 
they  shall  be  chargeable  with  interest  thereon  for  the  use  of 
the  estate. 

Sees.  3804-3806.  Guardians. — If  at  any  time  any  guardian 
shall  have  on  hand  any  money  belonging  to  his  ward,  beyond 
what  may  be  necessary  for  his  education  and  maintenance, 
such  guardian  shall,  under  the  direction  of  the  court,  loan 
the  same  to  such  person  as  will  give  security  therefor,  and 
such  money  shall  be  loaned  on  such  time  as  the  court  shall 
direct. 

If  any  guardian  fail  to  loan  the  money  of  his  ward  on 
hand,  as  aforesaid,  under  the  provisions  of  this  act,  he  shall 
be  accountable  for  the  interest  thereon. 

Guardians  and  curators  shall  loan  the  money  of  their  wards 
at  the  highest  rate  of  interest  prevailing  in  the  community 
that  can  be  obtained  on  unencumbered  real  estate  security, 
and  then  not  more  than  to  the  extent  of  one-half  of  the  value 
thereof.  The  interest  in  all  cases  shall  be  paid  annually,  and 

20 


ARKANSAS.  21 

if  not  then  paid  shall  become  a  part  of  the  principal  and  bear 
interest  at  the  same  rate. 

Trustee  May  Not  Deal  With  Trust  Property  For  His  Own  Benefit. 

The  courts  look  with  disfavor  upon  transactions  in  which  the  trustee 
deals  personally  with  the  estate.  Such  transactions  will  not  be  upheld 
unless  it  clearly  appears  that  the  beneficiary  was  fully  informed  as  to 
the  value  of  the  property  and  the  nature  of  his  interests.  The  burden 
is  upon  the  trustee  to  show  good  faith.  The  trustee  cannot  directly  or 
indirectly  purchase  for  his  own  benefit.  Cornish  v.  Johns,  74  Ark.  231;. 
McNeil  v.  Gates,  41  Ark.  264;  Haynes  v.  Montgomery,*  96  Ark.  573. 


CALIFORNIA. 

TRUSTEES    GENERALLY. 

Code    of    1906. 
(With   Amendments   to    1914.) 

Sec.  2258.  'Trustees  Must  Obey  Declaration  of  Trust.— A 
trustee  must  fulfill  the  purpose  of  the  trust,  as  declared  at  its 
creation,  and  must  follow  all  the  directions  of  the  truster  given 
at  that  time,  except  as  modified  by  the  consent  of  all  parties 
interested,  in  the  same  manner,  and  to  the  same  extent,  as  an 
employee. 

Sec.  2259.  Diligence  in  Execution  of  Trust. — A  trustee, 
whether  he  receives  any  compensation  or  not,  must  use  at 
least  ordinary  care  and  diligence  in  the  execution  of  his  trust. 

Sec.  2261.  Investment  of  Money  by  Trustee. — A  trustee 
must  invest  money  received  by  him  under  the  trust,  as  fast  as 
he  collects  a  sufficient  amount,  in  such  manner  as  to  afford 
reasonable  security  and  interest  for  the  same. 

Sec.  2262.  Interest,  Simple  or  Compound,  and  Omission  to 
Invest  Trust  Moneys. — If  a  trustee  omits  to  invest  the  trust 
moneys  according  to  the  last  section,  he  must  pay  simple  in- 
terest thereon,  if  such  omission  is  negligent  merely,  and  com- 
pound interest  if  it  is  willful. 

Sec.  2228.  Trustee's  Obligation  to  Act  in  Good  Faith. — In 
all  matters  connected  with  his  trust,  a  trustee  is  bound  to  act 
in  the  highest  good  faith  toward  his  beneficiary,  and  may  not 
obtain  any  advantage  therein  over  the  latter  by  the  slightest 
misrepresentation,  concealment,  threat  or  adverse  pressure  of 
any  kind. 

Sec.  2229.  Trustee  Not  to  Use  Property  for  His  Own 
Profit. — A  trustee  may  not  use  or  deal  with  the  trust  prop- 
erty for  his  own  profit,  or  for  any  other  purpose  unconnected 
with  the  trust  in  any  manner. 

Sec.  2230.  Certain  Transactions  Forbidden. — Neither  a 
trustee  nor  any  of  his  agents  may  take  part  in  any  transaction 

22 


CALIFORNIA.  23 

concerning  the  trust  in  which  he  or  anyone  for  whom  he  acts 
as  agent  has  an  interest,  present  or  contingent,  adverse  to  that 
of  his  beneficiary,  except  as  follows: 

(1)  "When  the  beneficiary,  having   capacity  to  contract, 
with  a  full  knowledge  of  the  motives  of  the  trustee,  and  of 
all  other  facts  concerning  the  transaction  which  might  affect 
his  own  decision,  and  without  the  use  of  any  influence  on  the 
part  of  the  trustee,  permits  him  to  do  so ; 

(2)  When  the   beneficiary  not   having   capacity   to   con- 
tract, the  proper  court,  upon  the  like  information  of  the  facts, 
grants  the  like  permission;  or, 

(3)  "When  some  of  the  beneficiaries  having  capacity  to 
contract  and  some  not  having  it,  the  former  grant  permission 
for  themselves,   and  the  proper  court  for  the  latter,  in  the 
manner  above  prescribed. 

Sec.  2236.  Trustee  Mingling  Trust  Property  with  His 
Own. — A  trustee  who  willfully  and  unnecessarily  mingles  the 
trust  property  with  his  own,  so  as  to  constitute  himself  in 
appearance  its  absolute  owner,  is  liable  for  its  safety  in  all 
events,  and  for  the  value  of  its  use. 

TRUST     COMPANIES. 

Code     of    1909. 

Banking    Law,    Chapter    76. 
(With   Amendments   to    1914.) 

Sec.  105.  Every  trust  company  shall,  except  as  otherwise 
provided  by  law,  invest  its  capital  and  surplus  and  any  trust 
funds  received  by  it  in  connection  with  its  trust  business,  in 
accordance  with  the  laws  relative  to  the  investment  or  loan 
of  funds  deposited  with  savings  banks,  unless  a  specific 
agreement  to  the  contrary  is  made  between  the  trust  company 
and  the  party  creating  the  trust,  or  unless  it  is  otherwise  or- 
dered by  the  court,  in  connection  with  any  court  trust. 

SAVINGS   BANKS. 

Sec.  61.  Any  savings  bank  may  purchase,  hold  and  con- 
vey real  or  personal  property  as  follows: 

1.     The  lot  and  building  in  which  the  business  of  the  bank 


24  STATE  LAWS  AND  DECISIONS. 

is  carried  on;  furniture  and  fixtures,  vaults  and  safe  deposit 
vaults  and  boxes  necessary  or  proper  to  carry  on  its  bank- 
ing business;  such  lot  and  building,  furniture  and  fixtures, 
vaults  and  safe  deposit  vaults  and  boxes  shall  not,  in  the  aggre- 
gate, be  carried  on  the  books  of  such  bank  as  an  asset  to  an 
amount  exceeding  its  paid-up  capital  and  surplus;  and  here- 
after, the  authority  of  a  two-thirds  vote  of  all  of  the  directors 
shall  be  necessary  to  authorize  the  purchase  of  such  lot  and 
building,  or  the  construction  of  such  building. 

2.  Such  as  may  have  been  mortgaged,  pledged  or  conveyed 
to  it  in  trust  for  its  benefit  in  good  faith,  for  money  loaned  in 
pursuance  of  the  regular  business  of  the  corporation. 

3.  Such  as  may  have  been  purchased  at  any  sales  under 
pledge,  mortgage  or  deed  of  trust  made  for  its  benefit  for  money 
so  loaned  and  such  as  may  be  conveyed  to  it  by  borrowers  in 
satisfaction  and  discharge  of  loans  made  thereon.    No  savings 
bank  shall  purchase,  own,  or  sell  personal  property,  except  such 
as  may  be  requisite  for  its  immediate  accommodation  for  the 
convenient  transaction  of  its  business,  notes  or  bonds  secured 
by  trust  deeds  or  mortgages  on  real  estate,  bonds,  securities  or 
evidences  of  indebtedness,  public  or  private,  gold  or  silver  bul- 
lion and  United  States  mint  certificates  of  ascertained  value,  and 
evidences  of  debt  issued  by  the  United  States.    No  savings  bank 
shall  purchase,  own,  hold  or  convey  bonds,  securities  or  evidences 
of  indebtedness,  public  or  private,  except  as  follows: 

(a)  Bonds  or  interest-bearing  notes  or  obligations  of  the 
United  States,  or  those  for  which  the  faith  and  credit  of  the 
United  States  are  pledged  for  the  payment  of  principal  and 
interest ; 

(b)  Bonds  of  this  state,  or  those  for  which  the  faith  and 
credit  of  the  State  of  California  are  pledged  for  the  payment 
of  principal  and  interest; 

(c)  Bonds  of  any  state  in  the  United  States  that  has  not, 
within  five  years  previous  to  making  such  investment  by  such 
bank,  defaulted  in  the  payment  of  any  part  of  either  principal 
or  interest; 

(d)  Bonds  of  any  county,  city  and  county,  city  or  school 
district  of  this  state ;  bonds  of  any  permanent  road  division  in 


CALIFORNIA.  25 

any  county  issued  in  pursuance  of  the  provisions  of  article  IX, 
chapter  II,  title  VI,  part  III,  of  the  Political  Code;  bonds  of 
any  sewer  district,  drainage  district,  reclamation  district,  protec- 
tion district,  or  sanitary  district  organized  under  the  laws  of 
this  state;  and  any  irrigation  district  bonds  which  the  law  may 
now  or  hereafter  authorize  to  be  used  as  security  for  the  deposit 
of  public  moneys;  provided,  that  the  total  amount  of  bonds  so 
issued  by  any  such  sewer  district,  drainage  district,  protection 
district,  or  sanitary  district,  does  not  exceed  fifteen  per  centum 
of  the  value  of  the  taxable  property  in  said  district  as  shown 
by  the  last  equalized  assessment  roll  of  the  county  in  which  said 
district  is  located ;  and  provided,  further,  that  the  total  amount 
of  bonds  issued  by  any  such  irrigation  district  does  not  exceed 
sixty  per  centum  of  the  aggregate  market  value  of  the  lands 
within  such  district,  and  of  the  water,  water  rights,  canals,  reser- 
voirs, reservoir  sites  and  irrigation  works  owned  or  to  be  ac- 
quired or  constructed  with  the  proceeds  of  any  of  such  bonds, 
by  said  district,  such  facts  in  reference  to  bonds  of  irrigation 
districts  to  be  determined  by  a  commission  now  or  hereafter  au- 
thorized by  law  to  ascertain  and  report  upon  such  facts. 

(e)  Bonds  of  any  county,  city  and  county,  city  or  town, 
in  any  state  of  the  United  States  other  than  the  State  of  Cali- 
fornia, issued  under  authority  of  any  law  of  such  state,  which, 
county,  city  and  county,  city  or  town,  had,  as  shown  by  the 
federal  or  state  census  next  preceding  such  investment,  a  popu- 
lation of  more  than  twenty  thousand  inhabitants;   provided, 
however,  that  the  entire  bonded  indebtedness  of  such  county, 
city  and  county,  city  or  town,  including  such  issue  of  bonds,  does 
not  exceed  fifteen  per  centum  of  the  value  of  the  taxable  prop- 
erty therein  as  shown  by  its  last  equalized  assessment  roll,  and 
provided,  further,  that  such  county,  city  and  county,  city  or 
town,  or  the  state  in  which  it  is  located  has  not  defaulted  in 
payment  of  either  principal  or  interest  due  upon  any  legally 
authorized  bond  issue  within  five  years  next  preceding  such  in- 
vestment. 

(f)  (1)  Bonds  of  any  railroad  corporation  incorporated 
under  the  laws  of  the  State  of  California  and  operating  ex- 
clusively therein,  provided  said  corporation  has  had.  for  its  fiscal 


26  STATE   LAWS   AND   DECISIONS. 

year  next  preceding  such  investment,  net  earnings,  after  pay- 
ment of  all  maintenance  charges,  operating  expenses  and  taxes 
sufficient  to  pay  the  interest  on  all  of  its  outstanding  mortgage 
indebtedness;  or 

(2)  Bonds  of  any  railroad  corporation  incorporated  under 
the  laws  of  any  other  state  in  the  United  States,  operating  at 
least  five  hundred  miles  of  standard  gauge  track,  exclusive  of 
sidings;  provided,  said  corporation  has  had  for  its  fiscal  year 
next  preceding  such  investment  net  earnings,  after  the   pay- 
ment of  all  maintenance  charges,  operating  expenses  and  taxes, 
amounting  to  at  least  one  and  one-half  times  the  interest  on 
all  its  outstanding  mortgage  indebtedness;  or 

(3)  Bonds  of  any  railroad  corporation,  the  payment  of  which 
has  been  guaranteed,  both  as  to  principal  and  interest,  by  a 
railroad  corporation  meeting  the  requirements  of  either  sub- 
division (1)  or  (2)  of  paragraph  (f)  of  this  section;  the  income 
of  which  latter  corporation,  together  with  the  income  of  any 
corporation  whose  bonds  it  has  guaranteed,  shall  have  been  suf- 
ficient to  pay  all  its  maintenance  charges,  operating  expenses, 
taxes  and  interest  on  all  its  outstanding  mortgage  indebtedness 
and,  in  addition  thereto,  interest  on  the  total  outstanding  mort- 
gage indebtedness  of  any   other  corporation  the   payment   of 
which  it  has  guaranteed,  for  the  periods  specified  in  the  re- 
spective subdivisions  of  this  paragraph  relating  thereto;  pro- 
vided, that  the  excess  of  income  of  any  corporation  whose  bonds 
have  been  so  guaranteed,  over  its  maintenance  charges,  operating 
expenses,  taxes  and  interest  on  its  outstanding  mortgage  indebt- 
edness, shall  not  apply  to  or  be  included  in  determining  the 
income  so  required.     In  determining  the  income  of  any  cor- 
poration specified  in  paragraph  (f)  of  subdivision  three  of  this 
section,  there  shall  be  included  the  income  of  any  corporation 
or  corporations  out  of  which  it  shall  have  been  formed  through 
consolidation  or  merger,  and  of  any  corporation  or  corporations, 
the  entire  business  and  income  producing  property  of  which  the 
corporation  issuing  such  bonds  has  wholly  acquired.    All  bonds 
authorized  for  investment  by  paragraph  (f)  of  subdivision  three 
of  this  section  must  be  secured  by  a  mortgage  or  trust  deed  which 
is  at  the  time  of  making  such  investment  either  a  first  mort- 


CALIFORNIA.  27 

gage  or  deed  of  trust,  a  refunding  mortgage  or  deed  of  trust 
providing  for  the  retirement  of  all  prior  lien  mortgage  debts 
of  said  corporation,  or  an  underlying  or  divisional  closed  mort- 
gage or  trust  deed  of  property  which  forms  a  part  of  the  operat- 
ing system  of  the  corporation  then  owning  said  property.  No 
savings  bank  shall  purchase  the  bonds  of  any  railroad  corpora- 
tion deriving  less  than  twenty  per  centum  of  its  gross  receipts 
from  passenger  revenues.  The  term  ''railroad  corporation," 
when  used  in  paragraph  (f)  of  subdivision  three  of  this  section, 
shall  have  the  meaning  defined  in  the  "Public  Utilities  Act" 
approved  December  23,  1911. 

(g)  Bonds  of  any  street  railroad  corporation;  or  of  any 
gas ;  water ;  pipe  line ;  light ;  power ;  light  and  power ;  gas,  light 
and  power ;  electrical ;  telephone ;  telegraph ;  or  telephone  and 
telegraph  corporation  or  of  any  other  "public  utility"  incor- 
porated under  the  laws  of  the  State  of  California;  and 

(1)  Operating  exclusively  in  the  State  of  California;  pro- 
vided, said  corporation  has  had,  for  its  fiscal  year  next  preced- 
ing such  investment,  net  earnings,  after  the  payment  of  all 
maintenance  charges,  operating  expenses  and  taxes,  amounting 
to  one  and  one-half  times  the  interest  on  all  its  outstanding 
mortgage  indebtedness;  or 

(2)  Operating  its  property  in  part  within  the  State  of  Cali- 
fornia; provided,  said  corporation  has  had,  for  each  of  its  two 
fiscal  years  next  preceding  such  investment,  net  earnings,  after 
the   payment  of  all  maintenance  charges,   operating  expenses 
and  taxes,  amounting  to  one  and  one-half  times  the  interest  on 
all  of  its  outstanding  mortgage  indebtedness;  or 

(3)  The  payment  of  which  is  guaranteed,  both  as  to  prin- 
cipal and  interest,  by  a  public  utility  corporation  meeting  the 
requirements  of  either  subdivision  (1)  or  (2)  of  paragraph  (g) 
of  this  section,  the  income  of  which  latter  corporation,  together 
with  the  income  of  any  corporation  whose  bonds  it  has  guar- 
anteed, shall  have  been  sufficient  to  pay  all  its  maintenance 
charges,  operating  expenses,  taxes  and  interest  on  all  its  total 
outstanding  mortgage  indebtedness,  and  in  addition  thereto,  in- 
terest on  the  total  outstanding  mortgage  indebtedness  of  any 
other  corporation  the  payment  of  which  it  has  guaranteed,  for 


28  STATE   LAWS   AND   DECISIONS. 

the  period  specified  in  the  respective  subdivisions  of  this  para- 
graph relating  thereto;  provided,  that  the  excess  of  income  of 
any  corporation  whose  bonds  have  been  so  guaranteed,  over  its 
maintenance  charges,  operating  expenses,  taxes  and  interest  on 
its  outstanding  mortgage  indebtedness  shall  not  apply  to  or  be 
included  in  determining  the  income  so  required.  In  determining 
the  income  of  any  corporation  specified  in  paragraph  (g)  of  sub- 
division three  of  this  section,  there  shall  be  included  the  income 
of  any  corporation  or  corporations  out  of  which  it  shall  have 
been  formed  through  consolidation  or  merger,  and  of  any  cor- 
poration the  entire  business  and  income  producing  property  of 
which  the  corporation  issuing  such  bonds  has  wholly  acquired. 
All  bonds  authorized  for  investment  by  paragraph  (g)  of  sub- 
division three  of  this  section  must  be  secured  by  a  mortgage 
or  trust  deed  which  is  at  the  time  of  making  such  investment; 
either 

I.  A  closed  first  mortgage  or  deed  of  trust;  or 

II.  A  first  mortgage  or  deed  of  trust  containing  provisions 
restricting  the  issuance  of  further  bonds  until  such  time  as  the 
income  of  said  corporations  shall  have  been  at  least  sufficient, 
during  the  twelve  months  next  preceding  the  issuance  of  any 
additional  bonds,   to  pay   all  maintenance  charges,   operating 
expenses,  taxes  and  one  and  one-half  times  the  interest  on  all 
its  mortgage  indebtedness  then  outstanding  and  on  the  addi- 
tional bonds  then  proposed  to  be  issued;  or 

III.  A  refunding  mortgage  or  deed  of  trust  providing  for 
the  retirement  of  all  prior  lien  mortgage  debts  of  said  corpora- 
tion, and  restricting  the  issuance  of  further  bonds  until  such 
time  as  the  income  of  said  corporation  shall  have  been  at  least 
sufficient,  during  the  twelve  months  next  preceding  the  issuance 
of  any  additional  bonds,  to  pay  all  maintenance  charges,  operat- 
ing expenses,  taxes  and  one  and  one-half  times  the  interest  on 
all  its  mortgage  indebtedness  then  outstanding,  and  on  the 
additional  bonds  then  proposed  to  be  issued;  or 

IV.  An  underlying  or  divisional  closed  mortgage  or  trust 
deed  of  property  which  forms  a  part  of  the  operating  system 
of  the  corporation  then  owning  said  property.    In  the  case  of 
bonds  secured  by  an  underlying  or  divisional  closed  mortgage 


CALIFORNIA.  29 

or  trust  deed,  the  net  income  required  by  this  section  shall  be 
based  exclusively  upon  the  income,  maintenance  charges,  operat- 
ing expenses,  taxes  and  mortgage  indebtedness  of  or  against 
the  property  covered  by  such  underlying  or  divisional  closed 
mortgage  or  trust  deed,  or  on  the  proper  proportionate  share  of 
such  property  in  the  general  income,  maintenance  charges,  oper- 
ating expenses,  taxes  and  mortgage  indebtedness  of  the  cor- 
poration then  owning  such  property ;  provided,  however,  that  if 
the  payment  of  the  bonds  secured  by  such  underlying  or 
divisional  closed  mortgage  or  trust  deed  shall  be  guaranteed  or 
assumed  by  the  corporation  then  owning  the  property  securing 
the  same,  such  bonds  shall  be  legal  investments  for  savings  banks, 
if  the  net  income  of  such  corporation  from  all  sources  after 
paying  all  of  its  maintenance  charges,  operating  expenses,  taxes 
and  mortgage  indebtedness  shall  equal  the  amount  herein  re- 
quired, notwithstanding  any  insufficiency  of  the  income  derived 
from  the  property  covered  by  such  underlying  or  divisional 
closed  mortgage  or  trust  deed  to  meet  the  requirements  of  this 
section. 

The  terms  "street  railroad  corporation,"  "pipe  line  corpora- 
tion," "gas  corporation,"  "electrical  corporation,"  "telephone 
corporation,"  "telegraph  corporation,"  "water  corporation," 
and  "public  utility,"  when  used  in  paragraph  (g)  of  subdivision 
three  of  this  section,  shall  each  have  the  meaning  defined  in  the 
"Public  Utilities  Act"  approved  December  23,  1911. 

(h)  Notes  or  bonds  secured  by  first  mortgage  or  deed  of 
trust  or  other  first  lien  upon  real  estate,  improved  or  unim- 
proved; provided,  that  the  entire  note  or  bond  issue  shall  not 
exceed  sixty  per  centum  of  the  market  value  of  such  real  estate, 
or  such  real  estate  with  improvements,  taken  as  security;  and 
provided,  further,  in  case  the  said  note  or  bond  issue  is  created 
for  a  building  loan  on  real  estate,  that  at  no  time  shall  the 
entire  outstanding  note  or  bond  issue  exceed  sixty  per  centum 
of  the  market  value  of  the  real  estate  and  the  actual  cost  of  the 
improvements  thereon  taken  as  security. 

(i)     Collateral  trust  bonds  or  notes  when  secured  by  either: 
(1)  Deposit  of  bonds  authorized  for  investment  by  this  sec- 


30  STATE   LAWS   AND   DECISIONS. 

tion,  of  a  market  value  at  least  fifteen  per  centum  in  excess  of 
the  par  value  of  the  collateral  trust  bonds  or  notes  issued ;  or 

(2)  Deposit  of  bonds  authorized  for  investment  by  this  sec- 
tion, and  other  securities,  of  a  combined  market  value  at  least 
twenty  per  centum  in  excess  of  the  par  value  of  the  collateral 
trust  bonds  or  notes  issued;  provided,  that  the  par  value  of 
said  collateral  trust  bonds  or  notes  shall  in  no  case  exceed  the 
market  value  of  that  portion  of  the  security  represented  by 
bonds  authorized  for  investment  by  this  section. 

(j)  Bonds  legal  for  investment  by  savings  banks  in  the 
states  of  New  York  or  Massachusetts;  provided,  however,  that 
as  to  bonds  of  the  character  specified  in  paragraph  (c)  or  (e) 
of  subdivision  three  of  this  section,  such  bonds  shall  also  con- 
form to  the  requirements  of  either  of  such  paragraphs. 

(k)  Certificates  issued  by  a  corporation  organized  under 
the  laws  of  this  state  with  a  paid-up  capital  stock  of  not  less 
than  one  hundred  thousand  dollars,  evidencing  and  conferring 
participation  to  an  indicated  amount  in  a  first  mortgage  on  real 
estate  and  the  debt  secured  thereby,  and  guaranteeing  the  pay- 
ment of  the  principal  of  the  mortgage  debt  at  its  maturity  or 
within  some  specified  time  thereafter  and  agreeing  to  pay  in- 
terest on  the  amount  of  the  participation  at  some  specified  rate, 
the  mortgage  however  and  debt  thereby  secured  to  be  assigned 
to  a  trust  company  and  held  by  it  as  security  for  the  payment 
of  said  mortgage  certificates  and  for  the  performance  of  all 
conditions  imposed  thereby  upon  the  corporation  issuing  the 
same,  provided  the  said  first  mortgage  indebtedness  shall  not 
exceed  sixty  per  centum  of  the  market  value  of  the  real  estate 
taken  as  security  and  provided  further  that  the  trust  company 
shall  certify  on  each  certificate  that  the  aggregate  amount  of 
the  certificates  issued  evidencing  and  conferring  participation 
in  any  one  such  mortgage  and  mortgage  debt  does  not  exceed 
the  principal  of  the  said  mortgage  debt ;  but  provided,  neverthe- 
less, that,  unless  such  certificates  are  made  legal  investment  for 
savings  banks  by  other  law  of  this  state,  no  savings  bank  shall 
purchase  any  such  certificates  until  the  corporation  issuing  the 
same  has  first  obtained  the  written  approval  of  the  superin- 
tendent of  banks  to  such  certificates  as  an  investment  for 


CALIFORNIA. 


31 


savings  banks.  The  actual  expense  of  investigating  any  issue 
of  such  certificates  presented  to  the  superintendent  of  banks  for 
approval  shall  be  paid  by  the  corporation  presenting  the  same, 
and  the  superintendent  of  banks,  before  making  such  investiga- 
tion, may  require  a  cash  deposit  of  such  amount  as  he  may  deem 
necessary  to  cover  such  expense.  The  superintendent  of  banks 
may  accept  and  act  upon  the  opinions  and  appraisements  of  any 
title  insurance  or  abstract  company,  attorneys  or  appraisers 
which  may  be  presented  by  such  corporation  so  applying  and 
the  reports  of  any  of  the  executive  officers  of  the  corporation 
issuing  such  certificates,  on  any  question  of  fact  concerning  or 
affecting  such  certificates,  the. security  thereof,  or  the  financial 
condition  of  the  corporation  issuing  the  same.  In  lieu  of  or  in 
addition  to  such  opinions,  appraisements  and  reports,  the  super- 
intendent of  banks  may,  if  he  deems  proper,  have  any  or  all 
such  matters  passed  upon  and  certified  to  him  by  attorneys, 
appraisers  or  accountants  of  his  own  selection  at  the  expense  of 
the  applicant.  The  superintendent  of  banks  shall  keep  an 
official  list  of  all  issues  of  such  certificates  approved  by  him. 

No  notes,  bonds,  or  other  securities,  the  payment  of  which 
is  secured  by  any  mortgage  or  deed  of  trust  executed  after  Sep- 
tember 1,  1913,  shall  be  deemed  to  come  within  or  conform  to 
the  requirements  of  either  of  paragraphs  (f),  (g)  or  (i)  of  sub- 
division three  of  this  section,  unless  such  notes,  bonds  or  other 
securities  shall,  in  the  manner  provided  in  this  act,  have  been 
certified  by  the  superintendent  of  banks,  to  come  within  and 
fully  conform  to  the  requirements  of  one  or  the  other  of  said 
paragraphs. 

The  legality  of  investments  heretofore  lawfully  made  pur- 
suant to  the  provisions  of  this  section,  or  of  any  law  of  this 
state  as  it  existed  on  and  subsequent  to  July  1,  1909,  shall  not 
be  affected  by  any  amendments  to  this  section  or  this  act;  nor 
shall  any  such  amendments  require  the  changing  of  investments 
once  lawfully  made  under  this  act. 

Any  bonds  authorized  by  this  section  as  a  legal  investment 
for  savings  banks  may  be  carried  on  the  books  of  said  bank  at 
their  investment  value  based  on  their  market  value  at  the  time 
they  were  originally  bought,  unless  the  superintendent  of  banks 


32  STATE  LAWS  AND  DECISIONS. 

shall  require  any  or  all  of  the  bonds  which  may  thereafter  have 
a  market  value  less  than  the  original  investment  value  to  be 
written  down  to  such  new  market  value,  which  shall  be  done 
gradually  if  practicable  and  in  such  manner  as  he  may  deter- 
mine; or  he  may,  by  a  plan  of  amortization  to  be  determined 
by  him,  require  such  gradual  extinction  of  premium  as  will 
bring  such  bonds  to  par  at  maturity. 

No  savings  bank  shall  hereafter  purchase  or  loan  money 
upon  any  bond,  note  or  other  evidence  of  indebtedness,  issued 
by  any  " public  utility,"  subject  to  the  jurisdiction,  regulation 
or  control  of  the  railroad  commission  of  this  state  under  the 
provisions  of  the  " Public  Utilities  Act,"  approved  December 
23,  1911,  unless  each  such  bond,  note  or  other  evidence  of  in- 
debtedness was  either: 

(a)  Issued  prior  to  the  taking  effect  of  the  "Public  Utilities 
Act";  or 

(b)  Issued  under  authority  of  the  railroad  commission,  in 
accordance  with  the  provisions  of  said  act;  or 

(c)  A  note  issued  for  a  period  not  exceeding  twelve  months, 
in  accordance  with  the  provisions  of  subdivision  (b)  of  section 
fifty-two  of  said  act. 

No  provision  of  this  act,  and  no  act,  or  deed,  done  or  per- 
formed under  or  in  connection  therewith,  and  no  finding  made 
or  certificate  issued  under  any  provision  thereof,  shall  be  held 
or  construed  to  obligate  the  State  of  California  to  pay,  or  be 
liable  for  the  payment  of,  or  to  guarantee  in  any  manner  what- 
soever, the  regularity  or  the  validity  of  the  issuance  of  any  stock 
or  bond  certificate,  or  bond,  note,  or  other  evidence  of  indebt- 
edness certified  under  any  provision  of  this  act,  by  the  super- 
intendent of  banks,  as  being  in  conformity  with  the  requirements 
of  any  paragraph  of  subdivision  three  of  this  section. 

Sec.  67.  1.  No  savings  bank  shall  loan  money  except  on  ade- 
quate security  of  real  or  personal  property,  and  no  such  loan 
shall  be  made  for  a  period  longer  than  ten  years ;  provided,  that 
no  such  loan  shall  be  made  on  unsecured  notes. 

2.  No  savings  bank  shall  invest  or  loan  more  than  five  per 
centum  of  its  assets  on  any  one  bond  issue,  except  bonds  of  the 
United  States,  of  the  State  of  California,  bonds  for  which  the 


CALIFORNIA.  33 

faith  and  credit  of  the  United  States  or  of  the  State  of  Cali- 
fornia are  pledged,  or  bonds  of  any  county,  city  and  county, 
city  or  school  district  in  this  state,  or  bonds  of  any  irrigation 
district  such  as  are  legal  for  investment  by  savings  banks. 

3.  No  savings  bank  shall  loan  money: 

(a)  On  bonds  of  the  character  specified  in  paragraphs  (a), 
(b),  (c)   and  (d)  of  subdivision  three  of  section  sixty-one  of 
this  act,  unless  such  bonds  shall  have  a  market  value  at  least 
ten  per  centum  in  excess  of  the  amount  loaned  thereon;  or, 

(b)  On  bonds  of  the  character  specified  in  paragraphs  (e), 
(f)  and  (g)  or  on  bonds  or  notes  of  the  character  specified  in 
paragraph  (i)  of  subdivision  three  of  section  sixty-one  of  this 
act,  unless  such  bonds  or  notes  shall  have  a  market  value  at 
least  fifteen  per  centum  in  excess  of  the  amount  loaned  there- 
on; or, 

(c)  On  bonds  legal  for  investment  by  savings  banks  in  the 
states  of  New  York  or  Massachusetts,  unless  such  bonds  shall 
have  a  market  value  at  least  fifteen  per  centum  in  excess  of  the 
amount  loaned  thereon;  or, 

(d)  On  personal  property  unless   such  personal  property 
shall  have  a  market  value  at  least  fifty  per  centum  in  excess 
of  the  amount  loaned  thereon;  or, 

(e)  On  other  bonds,  or  on  the  capital  stock  of  any  corpora- 
tion, unless  such  bonds  or  stock  shall  have  a  market  value  at 
least  fifty  per  centum  in  excess  of  the  amount  loaned  thereon; 
provided,  however,  that  no  loan  shall  be  made  upon  the  capital 
stock  of  any  bank  unless  such  bank  has  been  in  existence  at  least 
two  years  and  has  earned  and  paid  a  dividend  on  its  capital 
stock. 

4.  No  savings  bank  shall  make  any  loan  on  the  security  of 
real  estate,  except  it  be  a  first  lien,  and  in  no  event  to .  exceed 
sixty  per  centum  of  the  market  value  of  any  real  estate  taken 
as  security  except  for  the  purpose  of  facilitating  the  sale  of 
property  owned  by  such  savings  bank;  provided,  that  a  second 
lien  may  be  accepted  to  secure  the  repayment  of  a  debt  pre- 
viously contracted  in  good  faith ;  and  provided,  also,  that  any 
savings  bank  holding  a  first  mortgage  or  deed  of  trust  on  real 
estate  may  take  or  purchase  and  hold  another  and  immediately 


34  STATE   LAWS    AND   DECISIONS. 

subsequent  mortgage  or  deed  of  trust  thereon,  but  all  such  loans 
shall  not  exceed  in  the  aggregate  sixty  per  centum  of  the  mar- 
ket value  of  the  real  estate  securing  the  same;  provided, 
further,  that  a  savings  bank  may  loan  not  to  exceed  ninety  per 
centum  of  the  face  value  of  a  note  or  bond  secured  by  a  first 
mortgage  or  deed  of  trust  on  real  estate,  but  in  no  event  shall 
any  such  loan  exceed  ninety  per  centum  of  sixty  per  centum 
of  the  market  value  of  the  real  estate  covered  by  said  mortgage 
or  deed  of  trust. 

5.  No  savings  bank  shall  purchase,  invest  or  loan  its  capital, 
surplus  or  the  money  of  its  depositors,  or  any  part  of  either, 
in  mining  shares  or  stock.  Any  president  or  managing  officer 
who  knowingly  consents  to  a  violation  of  any  provision  of  this 
section  shall  be  guilty  of  a  felony. 

Sec.  32.  Any  bank  receiving  trust  funds  in  accordance 
with  the  provisions  of  this  act  relating  to  trust  companies 
must  not  mingle  such  trust  funds  with  the  other  assets  of  the 
corporation,  and  such  funds  shall  not  be  carried  or  counted 
as  any  part  of  the  lawful  reserve  provided  for  in  this  act. 
The  officers  of  any  bank  who  knowingly  violate  or  consent  to 
the  violation  of  this  provision  shall  be  guilty  of  a  felony. 

Sec.  34.  No  bank  shall  purchase  or  invest  its  capital  or 
money  of  its  depositors,  or  any  part  of  either,  in  the  shares 
of  its  own  capital  stock;  nor  loan  its  capital  or  the  money 
of  its  depositors,  or  any  part  of  either,  on  the  shares  of  its 
own  capital  stock,  unless  such  purchase  or  loan  shall  be  nec- 
essary to  prevent  loss  on  debts  previously  contracted  in  good 
faith. 

Note. — By  incorporating  the  savings  bank  provision,  regarding  in- 
vestments, in  the  trust  company  law,  it  seems  that  both  trust  companies 
and  individual  trustees  are  permitted  to  invest  in  the  securities  named. 
Sec.  67,  of  the  savings  bank  law,  seems  to  permit  a  loan  upon  personal 
property  or  upon  stocks  of  corporations,  subject  to  the  limitations  men- 
tioned. Whether  or  not  this  provision  applies  also  to  trustees  does  not 
appear  to  have  been  determined.  Since  California  has  adopted  the 
"good  faith"  rule  and  has  dealt  liberally  with  trustees,  it  is  probable 
that  any  loans  made  in  accordance  with  the  provisions  of  the  savings 
bank  law  would  be  declared  legal,  provided  the  trustee  had  exercised 
due  diligence. 


CALIFORNIA.  35 

Purchase  of  Trust  Property  by  Trustee. 

A  trustee  cannot  purchase  property  for  himself  either  directly  or 
indirectly;  but  he  may  purchase  from  the  beneficiary  if  the  transaction 
is  fair  and  honest.  Golson  v.  Dunlap,  73  Cal.  157;  Wickersham  v.  Crit- 
tenden,  93  Cal.  17. 

Good  Faith  Required. 

When  trustees  act  in  good  faith  courts  of  equity  will  be  indulgent, 
especially  when  they  act  under  the  advice  of  counsel.  Supine  negligence 
or  willful  default  will  render  them  liable;  but  to  make  them  liable  for 
mere  errors  of  judgment  would  tend  to  discourage  good  and  prudent 
men  from  undertaking  a  trust.  Ellig  v.  Naglee,  9  Cal.  684. 

Advice  of  Attorney  Not  a  Complete  Defense. 

The  advice  of  an  attorney  does  not  necessarily  shield  a  trustee  where 
a  loan  is  made  on  improper  security.  A  will  directed  an  executor  to 
loan  the  funds  upon  first-class  real  estate  security,  and  the  executor 
loaned  a  thousand  dollars  upon  realty  valued  at  twenty-two  hundred 
dollars.  The  property  was  already  subject  to  a  loan  of  two  thousand 
dollars,  and  a  search  of  the  record  would  have  revealed  this  fact.  The 
attorney  for  the  executor  secured  the  loan  without  searching  the  record. 
The  trustee  was  negligent  in  not  having  determined  whether  the  title 
was  clear.  Estate  of  Holbert,  48  Cal.  627. 

Trustee  Must  Bear  Expenses  Resulting  from  Unauthorized  Loan. 

When  an  executor  makes  an  illegal  or  unauthorized  investment,  the 
expenses  of  litigation  and  attorney's  fees  cannot  be  charged  against  the 
estate.  Estate  of  Holbert,  48  Cal.  627. 

Mingling  Trust  Funds  and  Using  in  Own  Behalf. 

When  a  trustee  mingles  trust  funds  with  his  own  and  uses  them 
in  his  own  business  he  is  not  only  liable  for  the  loss  of  the  fund,  but 
the  court  has  the  right  to  deprive  him  of  commissions,  and  to  impose 
upon  him  interest  compounded  annually  up  to  the  time  of  the  settle- 
ment of  the  accounts.  Miller  v.  Lux,  100  Cal.  609;  In  re  Thompson, 
101  Cal.  349. 

A  guardian  who  mingles  the  funds  of  his  ward  with  his  own  is 
liable  for  the  return  of  the  principal  with  legal  interest  thereon,  com- 
pounded annually,  where  it  is  not  shown  that  larger  profit  was  realized. 
Estate  of  Cousins,  111  Cal.  441. 

The  same  rule  applies  to  executors,  administrators  and  trustees.  In 
re  Dow,  133  Cal.  446;  Bemmerly  v.  Woodward,  124  Cal.  568;  Estate  of 
Stott,  52  Cal.  403;  Estate  of  Clark,  53  Cal.  359;  Estate  of  Billiard,  83 
Cal.  423. 

But  where  an  administrator  does  not  use  the  funds  of  the  estate 
in  his  own  business,  and  does  not  make  any  profit  from  their  use,  the 
mere  fact  that  he  mingles  the  proceeds  of  a  sale  with  his  own  funds 


36  STATE  LAWS  AND  DECISIONS. 

does  not  justify  charging  him  with  interest  thereon  since  he  had  a  right 
to  the  custody  of  the  funds.  Neither  is  the  deposit  of  funds  in  a 
brother's  bank  sufficient  to  justify  a  finding  of  embezzlement  against 
an  administrator.  Estate  of  Sarment,  123  Gal.  331;  Estate  of  Marre, 
127  Gal.  128. 

Must  Invest  in  Authorized  Securities. 

It  is  the  imperative  duty  of  a  trustee  to  invest  trust  funds  in  au- 
thorized securities  and  keep  them  productive.  Bemmerly  v.  Woodward, 
124  Gal.  568. 

Carrying  on  Business  of  Testator. 

Unless  specifically  authorized  by  the  instrument  creating  the  trust,  a 
trustee  carries  on  the  business  of  the  creator  of  the  trust  at  his  peril. 
If  profit  is  made  it  inures  to  the  benefit  of  the  estate;  if  there  is  loss 
the  trustee  must  bear  it.  In  re  Bose,  80  Gal.  166. 

Giving  Away  Worthless  Assets. 

An  executor  has  no  right  to  give  away  the  assets  of  the  estate, 
even  though  he  may  consider  them  worthless,  and  an  attorney  who  rep- 
resents the  executor  has  no  right  to  receive  such  a  gift.  In  re  Badovich, 
74  Gal.  536. 

Investment  in  Bonds  of  a  Corporation  in  Which  Trustee  Is  Interested. 

A  trustee  who  invests  in  the  bonds  of  a  corporation  in  which  he  is 
interested  is  in  effect  dealing  with  the  funds  of  the  estate  for  his  own 
benefit,  and  the  investment  is  illegal.  Bermingham  v.  Wileox,  120 
Cal.  467. 

Trustee  Responsible  for  Illegal  Investments  of  His  Co-Trustee. 

The  creator  of  a  trust  had  entrusted  the  management  of  his  estate 
during  his  lifetime  to  two  persons,  each  of  whom  managed  certain  por- 
tions of  the  property.  The  trust  instrument  did  not  authorize  the 
trustees  thus  to  divide  the  management  of  the  estate.  Each  was  respon- 
sible for  the  acts  of  the  other  in  the  investment  of  the  trust  funds. 
Bermingham  v.  Wileox,  120  Cal.  467. 

Investment  by  Guardian. 

A  guardian  has  power  to  invest  the  estate  of  his  ward  without  an 
order  of  court,  but  if  he  does  so,  it  may  generally  be  said  that  he 
takes  the  risk.  This  rule  was  applied  where  a  guardian  invested  his 
ward's  money  in  notes  secured  by  real  estate  the  value  of  which  was 
equal  only  to  the  face  value  of  the  notes.  An  order  of  court  would 
have  protected  the  guardian.  In  re  Cardwell,  55  Cal.  137;  Estate  of 
Carver,  118  Cal.  73. 


CALIFORNIA.  37 

There  is  no  specific  provision  regarding  investments  by  a  guardian, 
but  the  statutes  provide  for  the  sale  of  a  ward's  property  and  the  in- 
vestment of  the  proceeds  under  an  order  of  court,  when  it  is  necessary 
for  the  interest  of  the  ward.  It  would  seem  that  a  guardian  who  wishes 
to  protect  himself  should  obtain  an  order  of  court  for  investments  or 
change  of  investments.  Civil  Code,  Sees.  1780,  1792. 

Taking  Loans  in  Individual  Name. 

The  words  "trust  property"  in  Sec.  2236  of  the  civil  code  are 
broad  enough  to  include  land  as  well  as  moneys.  A  trustee  who  will- 
fully and  unnecessarily  takes  title  to  real  property  belonging  to  the, 
trust  in  his  individual  name  or  takes  a  note  with  a  mortgage  as  security 
for  money  belonging  to  the  estate  is  guilty  of  mingling  trust  property 
with  his  own  and  is  liable  for  its  safety  in  all  events.  Matter  of  Bane, 
120  Cal.  533. 

The  same  rule  applies  if  he  deposits  money  in  bank  in  his  own 
name.  Estate  of  Wood,  159  Cal.  466. 

Temporary  Deposit  of  Funds. 

A  trustee  may  deposit  trust  moneys  temporarily  in  a  bank  for  safe 
keeping,  and  in  selecting  the  bank  he  is  required  to  exercise  the  care 
and  prudence  which  a  man  of  ordinary  skill  and  ability  would  exercise, 
and  he  must  mark  the  deposit  in  such  a  manner  as  to  show  its  trust 
character.  Estate  of  Wood,  159  Cal.  466. 

Funds  Cannot  be  Left  on  Deposit  in  Bank  as  an  Investment. 

A  deposit  in  bank,  savings  or  otherwise,  is  not  warranted  as  an  in- 
vestment, for  such  a  deposit  amounts  to  a  mere  loan  to  the  bank  on  per- 
sonal security.  Estate  of  Wood,  159  Cal.  466. 

Trustee  Must  Not  Lose  Control  of  Trust  Funds. 

By  depositing  money  in  a  savings  bank  and  surrendering  the  bank 
book  to  a  surety  company,  whose  consent  is  necessary  to  the  with- 
drawal of  any  of  the  fund,  the  trustee  loses  exclusive  control  of  the 
fund  and  thereby  violates  his  legal  duty.  Estate  of  Wood,  159  Cal. 
466;  Forsythe  v.  Woods,  11  Wall  (U.  S.)  484;  Perry  on  Trusts,  Sec.  443. 


COLORADO. 

TRUST    COMPANIES. 

Statutes    Annotated,    1910. 
(With   Amendments   to   1914.) 

Sec.  307.  Investment  of  Trust  Funds. — The  trustees  or 
board  of  directors  shall  have  a  discretionary  power  of  invest- 
ing moneys  received  by  them  in  trust  in  public  stocks  or 
bonds  of  the  United  States  or  of  any  individual  state,  or  in 
the  bonds  or  stock  of  any  incorporated  city  or  county  of  the 
state  duly  authorized  to  be  issued,  or  in  such  real  or  personal 
securities  as  they  may  deem  proper,  but  no  trust  company 
shall  invest  in  the  stock  or  bonds  of  any  private  incorporated 
company. 

Sec.  308.  No  Loans  to  Officers. — No  loan  shall  be  made 
by  any  trust  company  directly  or  indirectly  to  any  trustee, 
director  or  other  officer  thereof  and  no  loan  shall  be  made 
upon  stock  of  the  company. 

Sec.  310.  Governed  by  Same  Laws  as  Individual  Trus- 
tee.— In  the  exercise  by  said  company  of  the  powers  herein  au- 
thorized as  guardian,  executor,  administrator,  committee  or 
conservator  of  lunatics,  or  of  any  office  or  duty  imposed  by 
any  court,  said  company  shall  be  subject  to  the  same  respon- 
sibilities, shall  have  the  same  powers,  and  shall  receive  the 
same  compensation  as  fixed  by  law  with  relation  to  individuals 
holding  similar  offices  or  trusts,  except  as  herein  otherwise 
specially  provided.  The  exercise  of  the  other  powers  and  the 
performance  of  the  other  duties  by  said  company  may  be  as 
to  compensation  and  otherwise  matters  of  contract  with  the 
parties  interested. 

Sec.  311.  Trust  Funds  and  Investments  Shall  be  Kept 
Separate. — The  said  company  shall  keep  all  trust  funds  and 

38 


COLORADO.  39 

investments  separate  and  apart  from  the  assets  of  the  com- 
pany, and  all  investments  made  by  said  company  as  fiduciary 
shall  be  so  designated  that  the  trust  to  which  such  invest- 
ments shall  belong  shall  be  clearly  known. 


TRUSTEES    GENERALLY. 

Annotated    Statutes,    1912. 
(With   Amendments   to    1914.) 

Sec.  7147.  It  shall  be  lawful  for  executors,  adminis- 
trators, guardians  or  conservators  to  invest  the  moneys  be- 
longing to  their  respective  estates  in  the  bonds  of  the  United 
States,  or  in  the  bonds  of  this  state,  or  upon  mortgage 
security  to  be  approved  by  order  of  the  County  Court  to  be 
made  and  entered  of  record.  Every  such  investment  or  lend- 
ing shall  be  forthwith  reported  to  the  Courlty  Court  and  no 
loan  of  money  shall  be  for  a  longer  period  than  one  year: 
Provided,  that  guardians  and  conservators  may,  by  order  of 
the  County  Court,  made  and  entered  of  record  in  open  court, 
make  such  loans  for  a  longer  period,  not  exceeding  five  years 
and  not  exceeding  in  any  case  the  minority  of  the  infant,  and 
in  all  such  cases  the  interest  shall  be  made  payable  at  least 
as  often  as  once  each  year. 

Investment  in  Bonds  or  Stock  of  Private  Corporations 
Prohibited. — Section  36,  of  Article  5,  of  the  Colorado  Consti- 
tution provides  that,  "No  act  of  the  general  assembly  shall 
authorize  the  investment  of  trust  funds  by  executors,  ad- 
ministrators, guardians,  or  other  trustees,  in  the  bonds  or 
stock  of  any  private  corporation." 

Liability  for   Purchase  of   Trust   Property. 

Where  a  trustee  becomes  the  purchaser  of  trust  property,  the  cestui 
que  trust  may  set  aside  the  sale  or  hold  the  trustee  liable,  and  may 
require  an  accounting,  without  any  further  showing  than  the  mere 
fact  of  the  purchase  during  the  continuance  of  the  trust.  French  v. 
Woodruff,  25  Colo.  339.  Where  the  trustee  without  the  full  knowledge 
and  consent  of  his  cestui  que  trust,  in  dealing  with  the  trust  property, 
assumes  to  act  as  both  vendor  and  vendee,  the  cestui  que  trust  may 


40  STATE   LAWS   AND   DECISIONS. 

avoid  the  transaction.     Glengary  Consolidated  Mining  Company  et  al  v. 
Boehmer,  28    Colo.    1. 

Trustee  May  Not  Deal  with  Trust  Property  for  His  Own  Benefit. 

A  trustee  cannot  deal  with  the  trust  property  for  his  own  benefit 
or  become  the  owner  of  part  of  the  estate  through  a  settlement  with 
the  beneficiaries,  unless  he  can  show  that  the  transaction  was  perfectly 
fair  and  free  from  suspicion.  Lathrop  v.  Pollard,  6  Colo.  424;  Lovelaud 
v.  Fisk,  18  Colo.  201;  Hallack  v.  Traber,  23  Colo.  14. 

Mingling  of  Trust  Funds. 

A  trustee  who  mingles  trust  funds  with  his  own  must  account  for 
the  profits.  He  must  keep  the  funds  separate  and  apart  and  must  fol- 
low the  directions  of  the  trust  instrument,  making  investments  in  his 
name  as  trustee.  Hake  v.  Stott's  Exr.,  5  Colo.  140;  Smelting  Company 
v.  Eeed,  23  Colo.  523. 

Importance  of  Authorization  by  Court. 

In  Colorado  the  county  court  has  very  full  control  over  executors, 
administrators  and  guardians.  The  management  of  the  estate  is  a  duty 
which  belongs  to  the  court,  and  a  trustee  who  wishes  to  protect  him- 
self completely  when  making  investments  should  obtain  a  court  order. 
Vandevier  v.  County  Court,  3  Colo.  App.  425. 


CONNECTICUT.* 

TRUSTEES    GENERALLY. 

Revised    Statutes,    1902. 
(With   Amendments   to   1914.) 

Sec.  254.  Investment  of  Trust  Funds. — Trust  funds,  un- 
less it  is  otherwise  provided  in  the  instrument  creating  the 
trust,  may  be  loaned  on  the  security  of  mortgages  on  unin- 
cumbered  real  estate  in  this  state,  double  in  value  the  amount 
loaned,  or  may  be  invested  in  such  mortgages  or  in  the  bonds 
or  loans  of  this  state,  or  of  any  town,  city  or  borough  of 
this  state,  or  in  any  bonds,  stocks  or  other  securities  which 
the  savings  banks  in  this  state  are  or  may  be  authorized  by 
law  to  invest  in,  or  may  be  deposited  in  savings  banks  incor- 
porated by  this  state. 

Sec.  255.  Continuing1  Investments  as  Received. — Trust 
funds  received  by  executors,  trustees,  guardians,  or  conserva- 
tors may  be  kept  invested  in  the  securities  received  by  them, 
unless  it  be  otherwise  ordered  by  the  court  of  probate,  or  un- 
less the  instrument  under  which  said  trust  was  created  shall 
direct  that  a  change  of  investments  shall  be  made,  and  they 
shall  not  be  liable  for  any  loss  that  may  occur  by  depreciation 
of  such  securities. 

Savings  Banks. — Since  it  is  lawful  for  trustees  to  invest  in 
securities  which  are  authorized  for  savings  banks,  it  is  neces- 
sary to  give  the  provisions  of  the  savings  bank  law  relative  to 
investments.  It  will  be  noted  that  section  30  of  that  law  per- 
mits investments  in  personal  securities.  This  section  does  not 
appear  to  have  been  construed  by  the  courts,  and  we  are  of  the 
opinion  that  it  would  be  unwise  for  a  trustee  to  invest  in  such 
security. 


For  list  of  legal  investments  in  Connecticut  see  Part  HI. 

41 


42  STATE  LAWS  AND  DECISIONS. 

Laws    of   1913. 
Chapter   127. 

Sec.  1.  Savings  banks  may  invest  their  deposits  and 
surplus  only  as  hereinafter  provided. 

Sec.  2.  In  the  stock  or  bonds  or  interest-bearing  notes  or 
obligations  of  the  United  States,  or  those  for  which  the  faith 
of  the  United  States  is  pledged  to  provide  for  the  payment 
of  the  principal  and  interest,  including  the  bonds  of  the  Dis- 
trict of  Columbia. 

Sec.  3.  In  the  stock  or  bonds  or  interest-bearing  obliga- 
tions of  any  state  t>f  the  United  States  which  was  admitted  to 
statehood  prior  to  January  1,  1896,  which  has  not,  within  ten 
years  previous  to  making  such  investment  by  such  corporation, 
defaulted  for  more  than  ninety  days  in  the  payment  of  any 
part  of  either  principal  or  interest  of  any  debt  authorized 
by  the  legislature  of  such  state  to  be  contracted;  and  in  the 
bonds  or  interest-bearing  obligations  of  any  such  state  of  the 
United  States  which  have  been  issued  and  outstanding  for 
a  period  of  at  least  ten  years  previous  to  making  such  invest- 
ment by  such  corporation,  and  which  have  been  issued  in  pur- 
suance of  the  authority  of  the  legislature  of  such  state,  (1)  for 
the  funding  or  settlement  of  any  previous  obligation  of  such 
state  theretofore  in  default,  or  (2)  for  the  refunding  of  such 
funding  or  settlement  obligation  of  such  state  theretofore  in 
default,  and  on  which  said  funding  or  settlement  obligation 
or  obligation  issued  to  refund  the  same  there  has  been  no  de- 
fault in  the  payment  of  either  principal  or  interest  since  its 
issue,  provided  the  authorization  of  any  obligation  by  the 
legislature  of  any  such  state  hereinbefore  referred  to  shall 
not  have  been  in  violation  of  any  constitutional  provision, 
and  provided  such  bond  or  interest-bearing  obligation  shall 
be  the  direct  obligation  of  such  state  and  that  the  faith  and 
credit  of  the  state  shall  be  pledged  for  its  payment,  principal 
and  interest. 

Sec.  4.  In  the  obligations  of  any  county,  town,  city, 
borough,  school  district,  fire  district,  or  sewer  district,  in  this 
state. 


CONNECTICUT.  43 

Sec.  5.  In  the  stock  or  bonds  of  any  incorporated  city 
situated  in  one  of  the  states  of  the  United  States  which  was 
admitted  to  statehood  prior  to  January  1,  1896,  and  which  was 
incorporated  as  a  city,  under  the  same  or  a  different  name,  at 
least  twenty-five  years  prior  to  making  such  investment,  and 
which  has  not  less  than  twenty  thousand  inhabitants  as 
ascertained  by  the  United  States  or  state  census,  or  any 
municipal  census  taken  by  authority  of  the  state,  next  pre- 
ceding such  investment,  provided  the  amount  of  the  bonds 
of  such  city,  including  the  issue  in  which  such  investment  is 
made,  and  its  proportion,  based  on  the  valuations  of  prop- 
erty therein  for  the  assessment  for  taxation  next  preceding 
such  investment,  of  the  county  and  town  debt,  after  deduct- 
ing the  amount  of  its  water  debt  and  the  amount  of  the  sink- 
ing funds  which  are  available  for  payment  of  its  bonds  other 
than  water  bonds,  does  not  exceed  seven  per  centum  of  the 
valuation  of  the  taxable  property  in  such  city,  to  be  ascer- 
tained by  the  valuation  of  property  therein  for  the  assessment 
of  taxes,  next  preceding  such  investment,  and  provided  the 
city  issuing  such  bonds,  or  the  state  in  which  it  is  located, 
has  not  defaulted  for  more  than  ninety  days  in  the  payment 
of  any  of  its  funded  indebtedness  or  interest  thereon,  within 
fifteen,  years  next  preceding  the  purchase  of  such  bonds  by 
the  savings  bank.  The  provisions  of  this  section  shall  not 
authorize  the  investment  of  funds  in  any  "special  assessment" 
or  "improvement"  bonds,  or  other  bonds  or  obligations  which 
are  not  the  direct  obligations  of  the  city  issuing  the  same,  and 
for  which  the  faith  and  credit  of  the  issuing  city  are  not 
pledged.  A  city  or  state  shall  be  considered  to  be  in  default 
within  the  meaning  of  this  act  while  any  unpaid  and  overdue 
obligation,  either  principal  or  interest,  shall  be  outstanding. 

Sec.  6.  In  the  bonds  or  interest-bearing  obligations  issued 
by  a  railroad  corporation  organized  under  the  laws  of  any  of 
the  New  England  states,  and  owning  in  fee  not  less  than 
three  hundred  miles  of  railroad  located  in  said  states,  and 
which  has  paid  in  dividends  in  cash  an  amount  equal  to  not 
less  than  four  per  centum  per  annum  on  its  outstanding 
shares  of  capital  stock  in  each  fiscal  year  for  the  five  years 


44  STATE   LAWS   AND   DECISIONS. 

next  preceding  such  investment,  or  in  the  bonds  or  interest- 
bearing  obligations  issued  by  a  railroad,  terminal,  depot, 
bridge,  tunnel,  or  street  railway  corporation,  organized  under 
the  laws  of  any  of  the  New  England  states  or  the  state  of 
New  York  assumed  by  a  railroad  corporation  organized  under 
the  laws  of  any  of  the  New  England  states  and  owning  in  fee 
not  less  than  three  hundred  miles  of  railroad  located  in  said 
states  and  complying  with  all  the  provisions  of  this  section; 
if  any  such  railroad  corporation  shall  be  leased  to  another 
railroad  corporation  organized  under  the  laws  of  any  of  the 
New  England  states  and  owning  in  fee  not  less  than  three 
hundred  miles  of  railroad  located  in  said  states,  under  a  lease 
which  provides  for  the  payment  by  the  lessee  as  rental  of  an 
amount  sufficient  to  pay  dividends  on  the  capital  stock  of  the 
lessor  amounting  in  the  aggregate  in  each  fiscal  year  of  said 
lessor  corporation  during  the  term  of  said  lease  to  not  less 
than  four  per  centum  on  its  outstanding  shares  of  capital 
stock,  such  lessor  shall  be  regarded  as  having  paid  its  divi- 
dends within  the  meaning  of  this  section,  but  in  case  the 
lessee  shall  hold  any  shares  of  the  capital  stock  of  the  lessor 
such  shares  shall  not  be  considered  as  outstanding  within  the 
meaning  of  this  section. 

Sec.  7.  In  the  bonds  or  debentures  actually  issued  by  a 
railroad  corporation  incorporated  in  any  of  the  New  England 
states,  at  least  one-half  of  the  railroad  of  which  is  located 
in  said  state,  whether  such  corporation  is  in  possession  of  and 
is  operating  its  own  railroad  or  such  railroad  is  leased  to 
another  railroad  corporation  incorporated  in  any  one  of  the 
New  England  states,  provided  such  bonds  or  debentures  shall 
be  secured  either  by  a  mortgage  which  was  at  the  date 
thereof,  or  is  at  the  time  of  making  the  investment,  a  first 
mortgage  on  not  less  than  seventy-five  per  centum  of  the 
railroad  of  such  corporation  owned  in  fee  at  the  date  of 
the  mortgage,  or  by  a  refunding  mortgage  which  provides 
for  the  retirement  of  all  prior  lien  mortgage  bonds  of  such 
railroad  corporation,  or  by  a  mortgage  which  is  a  prior  lien 
on  some  part  of  the  raiload  covered  by  a  refunding  mortgage 
which  provides  for  the  retirement  of  all  outstanding  prior 


CONNECTICUT.  45 

lien  bonds,  or  that  if  the  railroad  and  railroad  property  of 
such  corporation  are  unincumbered  by  mortgage,  such  bonds 
or  debentures  shall  be  issued  under  the  authority  of  one  of 
said  states  which  provides  by  law  that  no  such  railroad  cor- 
poration which  has  issued  bonds  or  debentures  shall  subse- 
quently execute  a  mortgage  upon  its  road,  equipment,  fran- 
chise, or  upon  any  of  its  real  or  personal  property,  without 
including  in  and  securing  by  such  mortgage  all  bonds  or 
debentures  previously  issued  and  all  preexisting  debts  and 
liabilities,  and  provided  such  corporation  has  paid  in  divi- 
.dends  in  cash  an  amount  equal  to  not  less  than  four  per 
centum  per  annum  on  all  its  outstanding  capital  stock  in 
each  fiscal  year  for  the  five  years  next  preceding  such  invest- 
ments. If  any  such  railroad  company  shall  hold  the  railroad 
of  another  such  railroad  corporation  under  a  lease  which  pro- 
vides for  the  payment  by  the  lessee  as  rental  of  an  amount 
sufficient  to  pay  dividends  on  the  capital  stock  of  the  lessor 
amounting  in  the  aggregate  in  each  fiscal  year  of  said  lessor 
during  the  term  of  said  lease  to  not  less  than  four  per  centum 
on  all  its  outstanding  capital  stock,  such  lessor  shall  be  re- 
garded as  having  paid  its  dividends  within  the  meaning  of 
this  section,  but  in  case,  the  lessee  shall  hold  any  shares  of 
the  capital  stock  of  the  lessor  such  shares  shall  not  be  con- 
sidered as  outstanding  within  the  meaning  of  this  section. 

Sec.  8.  No  bonds  or  other  interest-bearing  obligations 
shall  be  made  a  legal  investment  by  sections  six  and  seven 
in  case  the  authorized  issue  thereof,  with  all  outstanding  prior 
debts  of  the  issuing  or  assuming  corporation,  including  all 
evidences  of  debt  that  may  legally  be  issued  under  any  of  its 
prior  authorizations  or  under  any  of  its  assumed  prior  au- 
thorizations, after  deducting  therefrom,  in  case  of  a  refunding 
mortgage,  the  bonds  reserved  under  the  provisions  of  said 
mortgage  to  retire  prior  debts  at  maturity,  shall  exceed  three 
times  the  outstanding  capital  stock  of  said  corporation  at  the 
date  of  such  investment. 

Sec.  9.  In  the  bonds  issued  by  a  railroad,  terminal,  depot, 
bridge,  tunnel,  or  street  railway  corporation  organized  under 
the  laws  of  any  of  the  New  England  states  or  the  state  of 


46  STATE   LAWS   AND   DECISIONS, 

New  York,  the  property  of  which  is  located  wholly  or  in  part 
in  one  of  said  states,  or  in  the  bonds  issued  by  a  railroad, 
terminal,  depot,  bridge,  tunnel,  or  street  railway  corporation, 
organized  under  the  laws  of  any  of  said  states,  assumed  by  a 
railroad,  terminal,  depot,  bridge,  tunnel,  or  street  railway 
corporation  organized  under  the  laws  of  said  states,  provided 
such  bonds  shall  be  secured  either  by  a  mortgage  which  was 
at  the  date  thereof,  or  is  at  the  time  of  making  the  invest- 
ment, a  first  mortgage  on  not  less  than  seventy-five  per 
centum  of  the  railroad  owned  in  fee  at  the  date  of  the  mort- 
gage, in  the  case  of  a  railroad  or  street  railway  corporation, 
or  the  fixed  property,  in  the  case  of  a  terminal,  depot,  bridge, 
or  tunnel  corporation,  owned  by  the  corporation  issuing  the 
bonds,  or  by  a  refunding  mortgage  which  provides  for  the 
retirement  of  all  prior  lien  bonds  of  such  corporation  or  by  a 
mortgage  which  is  a  prior  lien  on  some  part  of  the  property 
covered  by  a  refunding  mortgage  which  provides  for  the  re- 
tirement of  all  outstanding  prior  lien  bonds.  No  bond  shall 
be  made  a  legal  investment  under  this  section  unless  the 
bonds  are  guaranteed  principal  and  interest  by  endorsement 
by,  or  guaranteed  principal  and  interest  by  endorsement  which 
guaranty  has  been  assumed  by  a  railroad  corporation,  owning 
in  fee  not  less  than  three  hundred  miles  of  railroad  in  the  NCAV 
England  states,  whose  bonds  are  made  a  legal  investment 
under  section  six.  No  bonds  shall  be  made  a  legal  invest- 
ment by  this  section  in  case  the  mortgage  securing  the  bonds 
shall  authorize  a  total  issue  of  bonds  which,  added  to  the 
total  debt  described  in  section  eight,  of  the  guaranteeing 
corporation,  including  therein  the  authorized  amount  of  all 
previously  guaranteed  bond  issues,  shall  exceed  three  times 
the  outstanding  capital  stock  of  said  guaranteeing  corpora- 
tion at  the  time  of  making  said  investment. 

Sec.  10.  In  the  mortgage  bonds,  as  described  in  section 
fifteen,  issued  or  assumed  by  any  railroad  corporation  incor- 
porated under  the  laws  of  the  United  States,  or  any  state, 
provided  such  railroad  corporation  owned  in  fee  during  each 
of  the  five  fiscal  years  of  such  railroad  corporation  next  pre- 
ceding the  date  of  such  investment  not  less  than  five  hundred 


CONNECTICUT.  47 

miles  of  standard  gauge  railroad,  exclusive  of  sidings,  within 
the  United  States,  and  provided  such  railroad  corporation 
has  complied  during  each  of  said  fiscal  years  with  the  pro- 
visions of  section  fourteen,  or  if  such  corporation  owned  in 
fee  less  than  five  hundred  miles  of  such  railroad,  the  gross 
earnings  of  such  corporation,  as  reckoned  in  section  fourteen, 
shall  have  been  not  less  than  ten  million  dollars. 

Sec.  11.  In  the  mortgage  bonds,  as  described  in  section 
fifteen,  issued  or  assumed  by  any  railroad  corporation  incor- 
porated under  the  laws  of  the  United  States,  (or  any  state 
thereof,  provided  during  each  of  the  five  fiscal  years  of  such 
railroad  corporation  next  preceding  the  date  of  such  invest- 
ment, its  railroad  subjected  to  the  lien  of  the  mortgage  secur- 
ing its  bonds  has  been  operated  by  a  corporation  described  in, 
and  which  has  complied  with  all  the  provisions  of,  sections 
ten  and  fourteen.  No  bonds  shall  be  made  a  legal  invest- 
ment by  this  section  unless  the  bonds  are  guaranteed  principal 
and  interest  by  endorsement  by,  or  guaranteed  principal  and 
interest  by  endorsement  which  guaranty  has  been  assumed  by, 
the  corporation  operating  the  railroad  covered  by  the  mort- 
gage securing  the  bonds  and  which  has  complied  with  all  the 
provisions  of  sections  ten  and  fourteen. 

Sec.  12.  In  the  mortgage  bonds  as  described  in  this  act 
issued  or  assumed  by  any  terminal,  depot,  bridge,  or  tunnel 
company,  incorporated  under  the  laws  of  the  United  States, 
or  any  state,  provided  the  property  of  such  terminal,  depot, 
bridge,  or  tunnel  company  is  used  by  one  or  more  railroad 
corporations  described  in,  and  which  have  complied  with  all 
the  provisions  of,  sections  ten  and  fourteen.  No  bond  shall 
be  made  a  legal  investment  by  this  section  unless  the  bond 
is  guaranteed  principal  and  interest  by  endorsement  by,  or 
guaranteed  principal  and  interest  by  endorsement  which 
guaranty  has  been  assumed  by,  one  or  more  railroad  corpora- 
tions described  in,  and  which  has  complied  with  all  the  pro- 
visions of,  sections  ten  and  fourteen. 

Sec.  13.  In  the  mortgage  bonds  as  described  in  section 
fifteen  issued  or  assumed  by  any  railroad  corporation  incor- 
porated under  the  laws  of  the  United  States,  or  any  state, 


48  STATE   LAWS   AND   DECISIONS. 

provided,  during  each  of  the  five  fiscal  years  of  such  rail- 
road corporation  next  preceding  the  date  of  such  investment, 
such  railroad  corporation  owned  in  fee  not  less  than  one 
hundred  miles  of  standard  gauge  railroad,  exclusive  of  sidings, 
within  the  United  States,  and  provided  such  railroad  corpora- 
tion has  complied  during  each  of  said  fiscal  years  with  the 
provisions  of  section  fourteen.  No  bonds  shall  be  made  a 
Igeal  investment  by  this  section  unless  the  bonds  are  guar- 
anteed principal  and  interest  by  endorsement  by,  or  guar- 
anteed principal  and  interest  by  endorsement  which  guaranty 
has  been  assumed  by,  a  corporation  described  in,  and  which 
has  complied  with  all  the  provisions  of,  sections  ten  and  four- 
teen, nor  unless  it  complies  with  the  provisions  of  section  six- 
teen. 

Sec.  14.  Any  railroad  corporation  described  in  sec- 
tions ten  and  thirteen  shall  comply  with  the  provisions 
of  this  section  during  each  of  the  five  fiscal  years  of 
such  railroad  corporation  next  preceding  the  date  of  such 
investment,  before  any  of  its  mortgage  bonds,  as  de- 
scribed in  section  fifteen,  shall  be  made  a  legal  invest- 
ment. Such  railroad  corporation  shall  have  paid  the  ma- 
tured principal  and  interest  of  all  indebtedness  and  shall 
have  paid  in  dividends  in  cash  to  its  stockholders  an 
amount  equal  to  at  least  four  per  centum  upon  all  its  out- 
standing capital  stock;  the  gross  earnings  from  the  operation 
of  the  property  of  such  railroad  corporation,  including  therein 
the  gross  earnings  of  all  railroads  leased  and  operated  or 
controlled  and  operated  by  said  corporation,  and  the  gross 
earnings  from  the  sale  of  coal  from  mines  owned  or  con- 
trolled by  it,  shall  not  have  been  less  in  amount  than  five 
times  the  amount  necessary  to  pay  the  interest  payable  upon 
its  entire  outstanding  indebtedness,  the  rentals  of  all  leased 
lines,  and  the  interest  on  all  outstanding  indebtedness  of  rail- 
roads controlled  and  operated  which  are  not  owned  by  said 
corporation,  after  deducting  from  said  interest  and  rentals 
interest  and  dividends  received  from  the  stocks,  bonds,  or 
notes  of  railroad  corporations  not  operated  by  said  corpora- 
tion, which  have  been  deposited  wTith  a  trustee  as  the  only 


CONNECTICUT. 

security  for  the  payment  of  bonds  or  notes  issued  by  said 
corporation,  but  not  in  excess  of  the  interest  on  said  last 
named  bonds  or  notes. 

Sec.  15.  "Whenever  the  term  "mortgage  bonds"  is  issued 
in  sections  ten  to  twenty,  inclusive,  it  shall  mean  either  (1) 
that  the  mortgage  securing  the  bonds  was  at  the  date  thereof, 
or  is  at  the  date  of  such  investment,  a  first  mortgage  on  not 
less  than  seventy-five  per  centum  of  the  railroad,  in  the  case 
of  a  railroad  corporation,  or  the  fixed  property,  in  the  case 
of  a  terminal,  depot,  bridge,  or  tunnel  company,  owned  in 
fee  at  the  date  of  the  mortgage  by  the  corporation  which 
executed  the  mortgage  and  issued  the  bonds;  that  seventy-five 
per  centum  of  the  railroad  subject  to  the  lien  of  said  mortgage 
is  connected;  that  the  date  of  said  mortgage  is  at  least  five 
years  prior  to  the  date  of  such  investment ;  unless  the  corpora- 
tion issuing,  assuming,  or  guaranteeing  the  bond  has  com- 
plied with  section  fourteen  for  each  of  the  ten  fiscal  years  of 
such  corporation  next  preceding  the  date  of  such  investment; 
but  a  mortgage  given  in  substitution  for  and  not  greater  in 
amount  than  such  mortgage,  and  covering  the  same  railroad 
or  property,  shall  be  considered  to  be  in  accordance  with  this 
requirement;  (2)  that  if  the  mortgage  securing  the  bonds  was 
at  the  date  thereof,  or  is  at  the  date  of  such  investment,  not 
a  first  mortgage  on  not  less  than  seventy-five  per  centum  of 
the  railroad  owned  in  fee  at  the  date  of  the  mortgage,  it  is  a 
first  mortgage  on  at  least  seventy-five  per  centum  of  the  rail- 
road subject  to  the  lien  of  said  mortgage  at  the  date  thereof; 
but  if  any  stocks  or  bonds  are  deposited  with  the  trustee  of 
said  mortgage  as  part  security  therefor,  representing  or  cov- 
ering railroad  mileage  not  owned  in  fee,  the  bonds  secured  by 
said  mortgage  shall  not  become  legal  investments  unless  said 
corporation  owns  in  fee  at  least  seventy-five  per  centum  of 
the  actual  mileage  which  is  subject  to  the  lien  of  such  mort- 
gage, including  the  mileage  which  is  represented  or  covered 
by  said  stocks  or  bonds ;  that  seventy-five  per  centum  of  the 
railroad  of  said  mortgage  is  at  least  five  years  prior  to  the 
date  of  such  investment;  unless  the  corporation  issuing,  as- 
suming, or  guaranteeing  the  bond  has  complied  with  section 


50  STATE   LAWS   AND   DECISIONS. 

fourteen  for  each  of  the  ten  fiscal  years  of  such  corporation 
next  preceding  the  date  of  such  investment;  but  a  mortgage 
given  in  substitution  for  and  not  greater  in  amount  than  such 
mortgage,  covering  the  same  railroad  or  property,  shall  be 
considered  to  be  in  accordance  with  this  requirement;  (3)  that 
the  mortgage  securing  the  bonds  was  at  the  date  thereof,  or 
is  at  the  date  of  such  investment,  a  first  mortgage,  or  a  mort- 
gage or  trust  indenture  which  is  in  effect  a  first  mortgage 
upon  all  the  railroad,  subject  to  the  lien  of  said  mortgage  or 
trust  indenture  by  virtue  of  the  irrevocable  pledge  with  the 
trustee  thereof  of  an  entire  issue  or  issues  of  bonds  which 
are  a  first  lien,  upon  the  railroad  of  a  railroad  corporation 
which  is  owned  and  operated,  controlled  and  operated,  or 
leased  and  operated  by  the  corporation  issuing  or  assuming 
said  bonds;  that  seventy-five  per  centum  of  the  railroad  sub- 
ject to  the  lien  of  said  mortgage  is  connected;  that  the  date 
of  said  mortgage  is  at  least  five  years  prior  to  the  date  of 
such  investment,  unless  the  corporation  issuing,  assuming,  or 
guaranteeing  the  bonds  has  complied  with  section  fourteen 
for  each  of  the  ten  fiscal  years  of  such  corporation  next  pre- 
ceding the  date  of  such  investment;  but  a  mortgage  given 
in  substitution  for  and  not  greater  in  amount  than  such  mort- 
gage, and  covering  the  same  railroad  property,  shall  be  con- 
sidered to  be  in  accordance  with  this  requirement;  (4)  that 
the  mortgage  securing  the  bonds  was  at  the  date  thereof,  or 
is  at  the  date  of  such  investment,  a  refunding  mortgage  which 
provides  for  the  retirement  of  all  prior  lien  mortgage  bonds 
of  said  corporation  outstanding  at  the  time  of  said  invest- 
ment, and  covering  at  least  seventy-five  per  centum  of  the  rail- 
road owned  in  fee  by  said  company  at  the  date  of  said 
mortgage.  No  mortgage  is  to  be  regarded  as  a  refunding  mort- 
gage under  the  provisions  of  this  section  unless  the  bonds 
which  it  secures  mature  at  a  later  date  than  any  bond  which 
it  is  given  to  refund,  or,  in  case  bonds  are  issued  to  mature 
at  an  earlier  date  than  any  bond  which  it  is  given  to  refund, 
the  mortgage  contains  the  provision  that  bonds  issued  to 
mature  at  an  earlier  date  may  be  retired  by  a  like  amount  of 
bonds  reissued  under  said  mortgage;  (5)  that  the  mortgage 


CONNECTICUT.  51 

securing  the  bonds  is  a  prior  lien  to  a  refunding  mortgage  de- 
scribed above,  on  some  part  of  the  railroad  or  railroad  prop- 
erty covered  by  said  refunding  mortgage,  provided  the  bonds 
issued  under  such  mortgage  are  to  be  refunded  by  said  re- 
funding mortgage,  and  the  property  covered  by  said  prior  lien 
mortgage  is  operated  by,  and  its  operations  included  in,  those 
of  the  railroad  corporation  issuing  said  refunding  mortgage. 

Sec.  16.  No  bonds  shall  be  made  a  legal  investment  by 
section  ten  in  case  the  mortgage  securing  the  same  shall  au- 
thorize a  total  issue  of  bonds,  which,  with  all  outstanding 
prior  debts  of  the  issuing  or  assuming  corporation,  includ- 
ing all  bonds  not  issued  that  may  legally  be  issued  under 
any  of  its  prior  debts,  or  of  its  assumed  prior  debts,  after 
deducting  therefrom  in  case  of  a  refunding  mortgage,  the 
bonds  reserved  under  the  provisions  of  said  mortgage  to  re- 
tire prior  debts  at  maturity,  shall  exceed  three  times  the  out- 
standing capital  stock  of  said  corporation  at  the  date  of  such 
investment.  No  bond  shall  be  made  a  legal  investment  by 
sections  eleven,  twelve,  and  thirteen  in  case  the  mortgage 
securing  the  same  shall  authorize  a  total  issue  of  bonds,  which 
added  to  the  total  debt,  as  defined  in  this  section,  of  the  guar- 
anteeing corporation,  including  therein  the  authorized  amount 
of  all  previously  guaranteed  bond  issues,  shall  exceed  three 
times  the  capital  stock  of  said  guaranteeing  corporation  out- 
standing at  the  time  of  making  said  investment.  In  case  of  a 
mortgage  executed  prior  to  the  passage  of  this  act,  under 
which  the  total  amount  of  bonds  which  may  be  issued  is  not 
specifically  stated,  the  amount  of  bonds  outstanding  there- 
under at  the  date  of  such  investment  shall  be  considered  as 
the  total  authorized  issue. 

Sec.  17.  Bonds  which  have  been  or  shall  become  legal  in- 
vestments under  any  of  the  provisions  of  sections  ten  to 
twenty,  inclusive,  shall  not  be  rendered  illegal,  although  the 
corporation  issuing,  assuming,  or  guaranteeing  such  bonds, 
shall  fail  for  a  period  not  exceeding  two  successive  fiscal  years 
to  comply  with  the  requirements  of  sections  ten  and  four- 
teen, but  no  further  investment  in  the  bonds  issued,  assumed, 
or  guaranteed  by  said  corporation  shall  be  made  after  the 


52  STATE   LAWS   AND   DECISIONS. 

first  fiscal  year  of  such  failure;  but  if,  after  the  expiration 
of  said  period,  said  corporation  complies  for  the  following 
fiscal  year  with  all  the  requirements  of  sections  ten  and  four- 
teen it  shall  be  regarded  as  having  complied  therewith  during 
said  period,  and  thereupon  said  bonds  shall  be  legal  invest- 
ments, but  in  case  of  any  subsequent  failure  to  comply  with 
said  sections  ten  and  fourteen  the  bonds  of  said  corporation 
shall  not  be  purchased  until  said  corporation  shall  have  com- 
plied each  year  for  five  successive  years  with  said  sections 
ten  and  fourteen. 

Sec.  18.  Bonds  which  have  been  or  shall  become  legal  in- 
vestments under  any  of  the  provisions  of  sections  ten  to 
twenty,  inclusive,  shall  not  be  rendered  illegal,  because  the 
property  upon  which  they  are  secured  has  been  or  shall  be 
conveyed  to  or  legally  acquired  by  another  railroad  corpora- 
tion, and  the  corporation  which  issued  or  assumed  said  bonds 
has  been  or  shall  be  consolidated  with  another  railroad  cor- 
poration, if  the  consolidated  or  purchasing  corporation  shall 
assume  the  payment  of  said  bonds  and  so  long  as  it  shall  con- 
tinue to  pay  regularly  interest,  or  dividends,  or  both,  upon 
the  securities  issued  against,  in  exchange  for,  or  to  acquire 
the  stock  of  the  corporation  consolidated,  or  the  property  pur- 
chased, or  upon  securities  subsequently  issued  in  exchange 
or  substitution  therefor,  to  an  amount  at  least  equal  to  four 
per  centum  per  annum  upon  the  capital  stock  outstanding  at 
the  time  of  such  consolidation  or  purchase,  of  said  corpora- 
tion which  issued  or  assumed  said  bonds. 

Sec.  19.  If  a  railroad  corporation  which  has  complied 
with  all  the  requirements  of  sections  ten  and  fourteen  ex- 
cept that  the  period  of  compliance  is  less  than  five  years,  shall 
be,  or  shall  have  been,  consolidated  or  merged  with,  or  its 
railroad  purchased  and  all  the  debts  of  such  corporation  as- 
sumed by,  another  railroad  corporation  incorporated  under 
the  laws  of  the  United  States,  or  any  state,  the  corporation  so 
succeeding  shall  be  considered  as  having  complied  with  all  the 
provisions  of  said  sections  during  those  successive  years  next 
preceding  the  date  of  such  consolidation,  merger,  or  purchase 
in  which  said  consolidated,  merged,  or  purchased  corporations, 


CONNECTICUT.  53 

if  considered  as  one  continuous  corporation  in  ownership  and 
possession,  would,  taken  together,  have  so  complied,  provided 
in  the  case  of  a  railroad  corporation  which  has  complied  with 
all  the  requirements  of  said  sections,  except  that  the  period  of 
compliance  is  less  than  five  years,  said  succeeding  corporation 
shall  continue  so  to  comply  for  a  further  period  which  shall 
make  such  compliance  equivalent  to  at  least  five  successive 
years. 

Sec.  20.  If,  by  means  of  consolidation,  merger,  or  pur- 
chase, a  railroad  corporation  shall  own  and  possess  the  prop- 
erties and  franchises  which,  prior  thereto,  belonged  to  similar 
corporations,  and,  during  the  years  next  preceding  such  con- 
solidation, merger,  or  purchase,  one  or  more  of  said  corpora- 
tions have  regularly  paid  in  cash  to  stockholders  dividends  in 
amounts  equaling  or  exceeding  four  per  centum  per  annum 
upon  the  entire  capital  stock  of  the  successor  corporation  out- 
standing at  the  time  of  the  investment,  such  successor  cor- 
poration shall  be  considered  as  having  paid  such  dividends 
during  the  same  period  of  years. 

Sec.  21.  Savings  banks  may  invest  not  exceeding  two  per 
centum  of  their  deposits  and  surplus  in  equipment  trust  notes, 
bonds,  or  certificates  issued  by,  or  which  are  guaranteed  by 
endorsement  both  as  to  principal  and  interest  by,  or  which  are 
secured  by  lease  of  equipment  to,  a  railroad  corporation 
which,  in  case  of  a  railroad  corporation  incorporated  under 
the  laws  of  any  of  the  New  England  states,  has  complied 
with  section  six,  or  which,  in  the  case  of  a  railroad  corpora- 
tion incorporated  under  the  laws  of  any  other  state,  or  pf  the 
United  States,  has  complied  with  all  the  provisions  of  sections 
ten  and  fourteen,  provided  said  notes,  bonds,  or  certificates 
are  secured  by  a  first  lien  on,  or  by  a  lease  and  conditional 
sale  of,  new  standard  railroad  equipment  free  from  other  en- 
cumbrances, for  the  purchase  of  which  said  notes,  bonds,  or 
certificates  were  issued  at  not  exceeding  ninety  per  centum  of 
the  purchase  price  thereof,  and  provided  the  instrument  under 
which  such  notes,  bonds,  or  certificates  are  issued,  or  the  lease 
of  such  equipment  to  the  railroad  corporation,  provides  for 
the  proper  maintenance  of  the  equipment  covered  thereby  and 


54  STATE  LAWS  AND  DECISIONS. 

for  the  payment  of  the  entire  issue  of  such  notes,  bonds,  or 
certificates  in  not  exceeding  fifteen  annual  or  thirty  semi- 
annual installments,  without  the  release  of  any  part  of  the  lien 
or  interest  in  any  of  the  equipment  securing  such  notes,  bonds, 
or  certificates  until  the  entire  issue  of  such  series  of  notes, 
bonds,  or  certificates  shall  have  -been  paid  or  redeemed.  No 
equipment  trust  notes,  bonds,  or  certificates  shall  be  made  a 
legal  investment  by  this  section  in  case  the  series  authorizes 
an  amount  which,  added  to  the  total  debt  as  defined  in  section 
eight  in  the  case  of  a  railroad  corporation  organized  under 
the  laws  of  any  of  the  New  England  states,  or  section  sixteen 
in  the  case  of  a  railroad  corporation  organized  under  the  laws 
of  any  other  state  or  of  the  United  States,  which  issued  or 
guaranteed  or  is  the  lessee  of  the  equipment  trust  notes, 
bonds,  or  certificates,  including  therein  the  outstanding 
amount  of  all  previously  issued  series  of  such  equipment  trust 
notes,  bonds,  or  certificates,  shall  exceed  three  times  the 
capital  stock  of  such  railroad  corporation  outstanding  at  the 
time  of  making  said  investment. 

Sec.  22.  Savings  banks  may  invest  not  exceeding  two  per 
centum  of  their  deposits  and  surplus  in  bonds  issued  by  any 
street  railway  corporation  incorporated  in  this  state,  the  rail- 
way of  which  is  located  wholly  or  in  part  therein,  provided 
such  bonds  are  secured  by  a  mortgage  which  was  at  the  date 
of  the  mortgage  or  is  at  the  date  of  the  investment  a  first 
mortgage  on  not  less  than  seventy-five  per  centum  of  the  rail- 
way of  such  corporation  owned  in  fee  at  the  date  of  the  mort- 
gage, .and  provided  the  gross  earnings  of  said  corporation 
each  fiscal  year  for  the  five  years  next  preceding  the  date  of 
such  investment,  were  not  less  than  one  hundred  thousand 
dollars,  and  that  said  corporation  in  each  of  said  years  earned 
and  paid  in  dividends  in  cash  an  amount  equal  to  at  least  four 
per  centum  per  annum  upon  the  outstanding  capital  stock, 
and  provided,  at  the  date  of  any  such  dividend,  the  outstand- 
ing capital  stock  is  equal  to  at  least  one-half  of  the  debt  of 
such  corporation. 

Sec.  23.  Savings  banks  may  invest  not  exceeding  two  per 
centum  of  their  deposits  and  surplus  in  mortgage  bonds  and 


CONNECTICUT.  55 

other  interest-bearing  obligations  of  any  water  company  sup- 
plying water  for  domestic  use  to  communities  in  this  state 
having  a  population  of  not  less  than  fifty  thousand  whose 
franchise  is  an  exclusive  one  and  unlimited  in  time,  provided 
the  amount  of  all  the  outstanding  debts  of  such  company 
does  not  exceed  its  capital  stock,  and  provided  such  water 
company  has  earned  each  year  and  paid  in  cash  from  its 
officially  reported  net  earnings,  as  shown  by  its  annual  report 
or  other  sworn  official  statement,  to  municipal,  state,  or  United 
States  authorities,  dividends  of  not  less  than  four  per  centum 
per  annum  on  its  entire  outstanding  capital  stock,  for  a  period 
of  four  years  next  preceding  the  making  of  the  investment. 

Sec.  24.  Savings  banks  may  invest  not  exceeding  two 
per  centum  of  their  deposits  and  surplus  in  bonds  of  any  tele- 
phone company  incorporated  in  this  state,  whose  property  is 
located  chiefly  in  this  state,  which  are  secured  by  a  first 
mortgage  upon  at  least  seventy-five  per  centum  of  the  prop- 
erty of  such  company,  including  its  franchises,  rights,  and 
privileges,  and  limiting  the  amount  of  bonds  issuable  there- 
under to  seventy-five  per  centum  of  the  valuation  of  the 
property  mortgaged,  excluding  any  valuation  of  said  fran- 
chises, rights,  and  privileges,  and  providing  the  gross  income 
of  such  telephone  company  shall  have  been  not  less  than  two 
million  dollars  per  annum  during  each  of  the  five  fiscal  years 
of  such  telephone  company  next  preceding  the  date  of  such  in- 
vestment. 

Sec.  25.  Savings  banks  may  invest  not  exceeding  two  per 
centum  of  their  deposits  and  surplus  in  bonds  of  any  tele- 
phone company  incorporated  in  any  of  the  New  England 
states,  or  in  the  state  of  New  York,  and  secured  by  a  first 
mortgage  upon  at  least  seventy-five  per  centum  of  the  prop- 
erty of  such  telephone  company,  or  by  the  deposit  with  a 
trust  company  incorporated  under  the  laws  of  one  of  the 
New  England  states  or  of  the  state  of  New  York  of  bonds 
and  shares  of  stock  of  other  telephone  corporations  under  an 
indenture  of  trust  which  limits  the  amount  of  bonds  so  se- 
cured to  seventy-five  per  centum  of  the  value  of  the  securities 
deposited  as  stated  and  determined  in  said  indenture,  and  pro- 


56  STATE  LAWS  AND  DECISIONS. 

vided  the  gross  income  of  such  telephone  company  shall  have 
been  not  less  than  twenty-five  million  dollars  per  annum  dur- 
ing each  of  the  five  fiscal  years  of  such  telephone  company 
next  preceding  the  date  of  such  investment.  No  bond  of  a 
telephone  company  shall  be  made  a  legal  investment  under 
sections  twenty-four  and  twenty-five  unless  during  each  of 
the  five  fiscal  years  of  such  telephone  company  next  preceding 
the  date  of  such  investment  said  telephone  company  shall  have 
paid  the  matured  principal  and  interest  of  all  its  indebted- 
ness, and  shall  have  paid,  during  each  of  said  years,  in  cash 
dividends  an  amount  equal  to  not  less  than  six  per  centum  per 
annum  on  all  its  outstanding  issues  of  capital  stock,  and  the 
dividends  paid  on  the  capital  stock  of  such  telephone  company 
shall  not  have  been  less  than  the  total  amount  necessary  to 
pay  the  interest  upon  its  entire  outstanding  indebtedness. 

Sec.  26.  Savings  banks  may  invest  in  the  capital  stock 
of  any  bank  or  trust  company  located  in  this  state,  or  in  the 
city  of  New  York,  or  in  the  city  of  Boston  in  the  state  of 
Massachusetts,  but  no  savings  bank  shall  hold  by  way  of  in- 
vestment and  as  security  for  loans,  more  than  twenty  per 
centum  of  its  deposits  in  the  stocks  of  such  banks  or  trust 
companies,  at  par  value,  nor  more  than  three  per  centum  of 
its  deposits,  nor  more  than  one  hundred  thousand  dollars 
of  par  value  in,  nor  more  than  one-quarter  of  the  capital  stock 
of,  any  such  bank  or  trust  company.  The  provisions  of  this 
section  shall  not  render  illegal  any  such  investments  now 
owned  by  any  bank  or  trust  company. 

Sec.  27.  Savings  banks  may  invest  in  loans  secured  by 
first  mortgage  on  unencumbered  real  estate,  not  to  exceed 
fifty  per  centum  of  the  value  of  such  real  estate,  located  in 
this  state,  or  in  the  county  of  Providence  or  "Washington  in 
the  state  of  Rhode  Island,  or. in  the  county  of  Hampden  or 
Berkshire  in  the  State  of  Massachusetts,  or  in  the  county  of 
Dutchess,  Putnam,  or  Westchester  in  the  state  of  New  York. 

Sec.  28.  When  any  loan  is  made  by  a  savings  bank  upon 
real  estate  the  security  shall  be  appraised  by  two  or  more 
suitable  persons,  well  known  in  the  community  where  such 
loan  is  made,  one  of  whom  shall  be  a  trustee  of  the  bank 


CONNECTICUT.  57 

making  the  loan.  Such  appraisal  shall  express  upon  its  face 
the  amount  at  which  such  property  is  appraised,  and,  with  a 
certificate  of  title  or  a  title  insurance  policy,  shall  be  lodged 
and  kept  with  the  institution  making  such  loan.  No  loan 
shall  be  made  by  any  savings  bank  to  any  corporation  or 
association  or  ecclesiastical  society  secured  by  a  mortgage 
upon  its  property,  unless  the  same  shall  be  accompanied  by 
the  individual  guaranty  of  some  responsible  party  or  parties, 
or  by  other  collateral  security  of  value  equal  to  the  amount 
of  the  sum  loaned.  The  directors  or  trustees  of  any  bank  con- 
senting to  any  loan  contrary  to  the  provisions  of  this  section 
shall  be  individually  responsible  for  any  loss  by  reason  of  such 
loan. 

Sec.  29.  Savings  banks  may  invest  not  exceeding  twenty 
per  centum  of  their  deposits  and  surplus  in  notes  secured  by 
pledge  of  stock  or  bonds  as  collateral,  provided  the  corpora- 
tion issuing  such  stock  or  bonds  shall  have  paid  thereon  divi- 
dends or  interest  at  the  rate  of  not  less  than  four  per  centum 
per  annum  during  the  two  years  next  preceding  the  time 
when  such  loan  is  made;  or  by  the  pledge  of  any  stock  or 
bonds  or  other  obligations  which  under  the  provisions  of  this 
act  may  be  purchased  by  savings  banks;  but  the  market 
value  of  any  securities  given  to  secure  any  collateral  loan 
shall  be  at  least  twenty  per  centum  in  excess  of  the  amount 
of  the  loan  and  not  more  than  five  per  centum  of  the  aggre- 
gate deposit  in  any  savings  bank  shall  be  loaned  on  the  stock, 
bonds,  or  other  obligations  of  one  corporation;  or  by  the 
pledge  of  deposit  accounts  and  books  in  savings  banks  in  this 
state  to  an  amount  not  exceeding  the  balance  due  from  said 
savings  banks  on  such  deposit  account. 

Sec.  30.  Savings  banks  may  invest  not  exceeding  ten  per 
centum  of  their  deposits  and  surplus  in  notes,  each  of  which 
shall  be  the  joint  and  several  obligation  of  two  or  more  parties, 
all  residents  of  this  state,  but  no  savings  bank  shall  loan  on 
personal  security  to  one  person  more  than  three  per  centum 
of  its  deposits  at  the  time  of  making  such  loan.  No  savings 
bank  shall  buy,  or  lend  any  money  upon,  any  obligations  on 
which  only  one  person  or  firm  shall  be  holden  without  taking 


58  STATE   LAWS   AND   DECISIONS. 

additional  security  for  the  same  equivalent  to  the  guaranty 
or  endorsement  of  some  other  responsible  party. 

Sec.  37.  If  any  street  railway  company,  the  bonds  of 
which  are  a  legal  investment,  prior  to  the  passage  of  this  act, 
shall  fail,  in  any  fiscal  year  subsequent  to  the  passage  of 
this  act,  to  pay  dividends  equal  to  four  per  centum  upon  its 
outstanding  capital  stock,  the  bonds  of  such  railway  company 
shall  cease  to  be  a  legal  investment,  until  such  company  has 
complied  with  all  the  provisions  of  section  twenty-two  of 
this  act. 

Continuing  Business. 

An  executor  who  continues  a  business  in  which  the  deceased  was 
a  partner  becomes  a  co-partner  and  is  liable  personally  for  the  debts 
of  the  partnership.  Alsop  v.  Mather,  8  Conn.  584. 

Trustees  Protected  if  They  Invest  in  Authorized  Securities. 

If  trustees  invest  in  the  securities  expressly  allowed  by  statute  they 
will,  except  under  very  extraordinary  circumstances,  be  protected,  no 
matter  how  the  investment  may  result.  Clark  v.  Beers,  61  Conn.  87. 

Investment  in  Individual  Name. 

The  law  presumes  that  a  trustee  acts  for  the  benefit  of  the  estate 
and  not  in  his  individual  capacity.  To  this  extent  the  law  presumes 
that  a  trustee  acts  for  the  estate,  and  he  may  be  protected  in  his  in- 
vestments although  they  have  been  made  in  his  own  name.  Johnson  v. 
Blackman,  11  Conn.  342. 

Corporate  Stock. 

Corporate  stock  can  never  be  a  suitable  investment  for  a  trustee 
unless  the  trust  instrument  specifically  provides  for  such  security.  Eeed 
v.  Eeed,  80  Conn.  401. 

An  executor  who  advised  the  widow  of  the  testator  to  invest  in 
certain  stocks  in  which  he  was  interested  was  guilty  .of  a  breach  of  con- 
fidence and  the  investment  was  illegal.  In  re  Potter's  Appeal,  56 
Conn.  1. 

But  this  rule  must  now  be  subject  to  the  exception  of  Sec.  26  of 
the  law  governing  investments  by  savings  banks,  permitting  investment 
in  bank  and  trust  company  stock. 

Railroad   Bonds. 

A  guardian  has  no  right  to  invest  funds  of  the  ward  in  railroad 
bonds.  In  re  Potter's  Appeal,  56  Conn.  1.  But  the  statutes  now  pro- 
vide for  investments  in  certain  railroad  and  corporation  bonds. 


CONNECTICUT.  59 

Trustee  May  Not  Obtain  Personal  Benefit. 

A  trustee  is  not  permitted  to  receive  any  personal  gain  from  his 
administration  of  the  trust  fund  or  from  his  investments.  Looby  v. 
Eedmond,  66  Conn.  444;  Campbell  v.  Campbell,  8  Fed.  Kep.  460. 

Investment  in   Chattel  Mortgage. 

Trustees  lent  the  fund  upon  notes  secured  by  mortgage  upon  a 
vessel  and  certain  corporate  bonds.  Such  security  was  improper  and 
inadequate.  New  Haven  Trust  Company  v.  Doherty,  75  Conn.  555. 

Must  Comply  With  Statutes. 

In  making  a  loan  on  security  not  authorized  by  statute,  without  ex- 
ercising the  care  and  prudence  of  an  ordinary  man,  trustees  act  wrong- 
fully and  become  personally  liable  for  the  loss.  New  Haven  Trust  Com- 
pany v.  Doherty,  75  Conn.  555. 

Converting  Existing  Investments  Into  Authorized  Securities. 

A  testator  directed  his  executors  to  convert  his  real  estate  into 
money  and  to  invest  the  proceeds  in  securities  which  were  legal  for 
savings  banks.  Certain  stocks  and  bonds  owned  by  the  testator  were 
first  class  securities  paying  high  dividends,  but  they  were  not  legal  for 
savings  banks.  Sec.  255  of  the  General  Statutes  permits  a  trustee 
to  retain  securities  received  as  a  part  of  the  trust  fund  unless  the  in- 
strument under  which  such  trust  was  created  directs  that  a  change  of 
investment  be  made.  In  the  present  case  the  evident  intention  of  the 
testator  was  to  strengthen  the  security  of  the  capital  of  the  trust  fund, 
and  the  trustees  were  bound  to  convert  the  securities  into  such  as  were 
legal  for  savings  banks.  Curtis  v.  Osborn,  79  Conn.  555. 

Bonds  Purchased  at  a  Premium. 

A  trustee  may  purchase  bonds  which  are  legal  for  trust  funds  at  a 
premium,  but  he  should  reserve  enough  out  of  the  annual  interest  to 
meet  the  premium.  Payment  of  premium  is  a  payment  from  the  capital 
of  the  estate.  No  p,art  of  the  capital  of  the  trust  fund  should  go  to  life 
tenants.  Curtis  v.  Osborn,  79  Conn.  555. 

Personal  Seeuritifts. 

Unsecured  notes  are  not  Legal  Investments  for  Trustees.  State  v. 
Hunter,  73  Cenn.  435. 

Due  Diligence. 

The  fact  that  other  persons  bought  similar  security  is  not  sufficient 
to  relieve  a  trustee.  He  is  bound  to  make  diligent  inquiry  as  to  the 
character  and  safety  of  the  investment.  State  v.  Washburn,  67  Conn. 
187. 


60  STATE  LAWS  AND  DECISIONS. 

Mortgages  on  Lands  in  Other  States. 

Loans  on  notes  secured  by  mortgage  of  land  in  other  states,  and  the 
purchase  of  such  notes,  cannot  be  regarded  as  prima  facie  a  proper  in- 
vestment of  trust  funds.  If  a  trustee  thus  invests  the  funds  he  must 
prove  not  only  good  faith,  but  also  due  diligence  in  ascertaining  the 
safety  of  the  particular  investment.  Clark  v.  Beers,  61  Conn.  87,  89; 
State  v.  Washburn,  67  Conn.  187. 

An  executor  who  advised  the  widow,  who  was  also  guardian  of  a 
minor,  to  invest  in  mortgages  on  western  lands  was  guilty  of  breach  of 
trust.  In  re  Potter's  Appeal,  56  Conn.  1. 

Retaining  Investments. 

A  conservator  may  keep  his  ward's  estate  invested  in  the  securities 
received  by  him  unless  otherwise  ordered  by  the  court  of  probate  and 
be  exempt  from  liability  by  reason  of  depreciation  of  such  securities. 
If  he  makes  a  change  in  the  investment  the  burden  is  upon  him  to) 
prove  a  reasonable  cause  for  such  a  change.  State  v.  Washburn,  67 
Conn.  187;  Gen.  Statutes,  Sec.  255. 

Damages. 

As  to  measure  of  damages  for  improper  investment  see  State  v. 
Washburn,  67  Conn.  187;  Gen.  Statutes,  Sec.  496. 


DELAWARE. 

TRUSTEES   GENERALLY. 

Laws  of  1909,  Chapter  226. 
(With   Amendments   to   1914.) 

Excepting  where  instruments  creating  trusts  prescribe 
otherwise,  trustees  named  in  wills  or  appointed  by  the  Chan- 
cellor, may  hereafter  invest  the  funds  of  their  trusts  in  securi- 
ties of  the  following  classes  and  kinds,  viz. : 

(a)  Stocks  and  bonds  and  interest-bearing  obligations  of 
the  United  States,  for  which  the  faith  and  credit  of  the  United 
States  are  pledged  to  provide  for  the  payment  of  the  interest 
and  principal  thereof,  including   the   bonds   of  the   District 
of  Columbia; 

(b)  Stocks  and  bonds  and  interest-bearing  obligations  of 
the  State  of  Delaware  and  of  any  other  state  of  the  United 
States,  issued  pursuant  to  the  authority  of  the  law  relating 
thereto ; 

(c)  Stocks    and  bonds   of   any   county   of  the   State   of 
Delaware  and  of  any  county  of  any  state  of  the  United  States, 
issued  pursuant  to  the  authority  of  the  law  relating  thereto; 

(d)  Stocks  and  bonds  of  any  school  district  of  the  State 
of  Delaware,  issued  for  school  purposes  and  pursuant  to  the 
authority  of  the  law  relating  thereto; 

(e)  Stocks   and   bonds    and   interest-bearing   obligations 
of  any  incorporated  city  or  town  of  the  State  of  Delaware 
or  of  any  of  the  states  of  the  United  States,  issued  pursuant 
to  the  authority  of  the  law  relating  thereto,  for  the  payment 
of  which  the  faith  and  credit  of  the  municipality  issuing  the 
same  are  pledged; 

(f)  Bonds  of  either  natural  persons  or  corporations,  se- 
cured by  first  mortgage  on  productive  real  estate,  free  from 
prior  incumbrances ; 

61 


62  STATE   LAWS   AND   DECISIONS. 

(g)  Bonds  of  railroad,  transportation  and  public  service 
corporations,  secured  by  mortgage  upon  the  property,  plants 
and  systems  of  such  corporations; 

(h)  Collateral  trust  bonds  of  railroad,  transportation  and 
public  service  corporations,  where  the  same  are  secured  by 
guaranteed  underlying  stocks  (or  bonds  secured  thereby), 
where  no  default  in  the  payment  of  installments  or  principal 
or  of  interest  for  more  than  ninety  days  after  the  same  has 
become  due,  has  occurred  in  connection  therewith,  within  a 
period  of  ten  years  preceding  the  investment  of  trust  funds 
therein ; 

(i)     Car  trust  certificates  and  equipment  trust  bonds; 

(j)  Underlying  securities  of  railroad,  transportation  and 
public  service  corporations,  bearing  guaranteed  dividends, 
where  no  default  in  dividends  has  occurred  after  the  guar- 
anty; 

(k)  Such  other  securities  as  may  be  approved  by  the 
Chancellor. 

By  the  laws  of  1911,  this  section  was  amended  by  insert- 
ing a  proviso  that,  "the  foregoing  specification  of  classes  of 
securities  in  which  trustees  may  invest  the  funds  of  their 
estates,  shall  not  be  construed  to  relieve  said  trustees  from  the 
duty  of  exercising  due  care  in  the  investment  of  said  funds." 

Continuing  Investments.  Sec.  1,  Ch.  115,  Laws  of  1895. — In 
case  the  guardian  of  any  minor,  or  the  trustee  under  any  will 
or  any  succeeding  trustee  shall  be  entitled  to  receive  any 
legacy  or  distributive  share  from  the  executor  or  adminis- 
trator of  any  testator  or  intestate,  such  guardian,  with  the 
approval  of  the  Orphan's  Court,  or  any  judge  thereof,  or 
such  trustee,  with  the  approval  of  the  Chancellor,  may  re- 
ceive from  such  executor  or  administrator  in  payment  of 
whole  or  any  part  of  such  legacy  or  distributive  share  in 
specie  by  assignment,  transfer  or  delivery,  according  to  the  na- 
ture and  character  of  the  property,  to  be  made  by  the  ex- 
ecutor or  administrator  of  any  testator  or  intestate  to  such 
guardian  or  trustee  of  any  stocks,  bonds,  judgments,  mort- 
gages, investments  or  other  personal  property  held  or  owned 
by  such  testator  or  intestate  at  the  time  of  his  death  at  the 


DELAWAEE.  63 

appraised  value  thereof  and  such  assignment,  transfer  or  de- 
livery shall  vest  the  legal  title  to  any  such  investments  or 
property  in  such  guardian  and  trustee.  And  such  guardian 
or  trustee  shall  not  be  accountable  or  liable  for  any  loss  or 
depreciation  in  the  value  of  any  such  stock,  bonds,  judgments, 
mortgages,  investments  or  other  personal  property  so  received 
and  held  by  him,  unless  the  same  shall  occur  through  the  cul- 
pable act,  neglect  or  default  of  such  guardian  or  trustee.  Pro- 
vided, that  nothing  herein  contained  shall  be  deemed  to  limit 
or  restrict  the  right  of  such  guardian  or  trustee  at  any  time 
to  alter  or  change  the  investment  of  such  legacy  or  distribu- 
tive share,  or  any  part  thereof,  with  the  approval  as  aforesaid. 

GuardiaJi. — Upon  application  of  a  guardian,  the  court 
(Orphan's  Court)  may  direct  money  in  his  hands  to  be  in- 
vested by  him,  as  guardian,  in  stocks  in  this  state,  or  funded 
debt  of  the  United  States,  to  be  designated  by  the  court,  or  to 
be  lent  by  him,  as  guardian,  on  security  to  be  approved  by 
the  court,  for  periods  not  exceeding  a  year  and  one  month; 
which  loan  may  be  continued,  on  his  application,  from  time 
to  time,  for  the  same  period;  and  a  guardian,  faithfully  fol- 
lowing the  directions  of  the  court,  shall  not  be  liable  for  the 
failure  of  the  security,  or  any  loss  resulting  from  any  such 
investment:  Provided,  he  shall  have  used  due  and  reasonable 
care  and  diligence  to  prevent  the  same. 

If  money  cannot  be  so  lent,  or  invested,  the  guardian  shall 
not  be  charged  with  interest,  unless  he  derives  benefit  from, 
or  uses  the  money.  Laws  of  Delaware,  Ch.  96,  Sec.  18. 

Power  of   Orphan's  Court. 

The  Orphan's  Court  in  Delaware  has  the  power  to  determine  the 
amount  and  character  of  investment  of  a  sum  to  be  invested  to  secure 
an  annuity  for  a  widow  who  has  relinquished  her  right  of  dower.  Green 
v.  Saulsbury,  6  Del.  Ch.  371. 

Trustee  May  Not  Use  Trust  Fund  For  His  Own  Benefit. 

Although  a  trustee  may  not  use  trust  funds  in  his  own  business  or 
for  Ms  own  profit,  the  mere  fact  that  he  had  such  an  investment  under 
consideration  is  not  ground  for  his  removal.  Massey  v.  Stout,  4  Del. 
Ch.  274;  Downs  v.  Eickards,  4  Del.  Ch.  416. 


-64  STATE  LAWS  AND  DECISIONS. 

May  Not  Purchase  Trust  Property. 

The  principle  upon  which  the  disqualification  of  the  trustee  to 
buy  the  trust  estate  rests  is  a  broad  one,  and  extends  as  well  to  sales 
conducted  by  others  as  to  those  conducted  by  himself.  Downs  v. 
Eickards  4  Del.  Ch.  416;  Willey  v.  Tindal,  5  Del.  Ch.  194. 

Liability  of  Co-Administrators. 

One  co-administrator  is  not  liable  for  the  separate  acts  of  the 
other  who  wasted  the  estate.  State  v.  Belin  &  Breck,  5  Del.  400. 

Deposit  in  Bank  in  Own  Name. 

If  an  executor,  administrator  or  trustee  deposits  trust  moneys  in  a 
bank  in  his  own  private  name,  or  mingles  the  trust  moneys  with  his 
own  moneys,  and  the  bank  fails,  he  is  personally  liable  and  must  bear 
the  loss.  Allen  v.  Leach,  7  Del.  Ch.  83. 

Leaving  Money  in  Bank. 

If  a  trustee  leaves  trust  moneys  in  a  bank  for  a  longer  time  than 
is  necessary  for  carrying  out  the  purposes  of  the  will  or  the  adminis- 
tration of  the  trust,  and  the  bank  fails,  he  is  personally  liable  for  the 
loss.  Allen  v.  Leach,  7  Del.  Ch.  83. 

Even  if  the  money  is  not  lost,  the  trustee  is  chargeable  with  in- 
terest. Allen  v.  Leach,  7  Del.  Ch.  83. 

Buying  in  at  Mortgage  Foreclosure. 

The  Court  of  Chancery  has  power  to  authorize  a  trustee  to  buy  in 
property  at  his  own  mortgage  foreclosure  sale.  This  may  be  done  when 
it  is  clearly  to  the  interest  of  the  beneficiary,  although  the  trust  instru- 
ment did  not  authorize  an  investment  in  real  estate.  In  re  Bellah, 
8  Del.  Ch.  59;  In  re  Baker,  8  Del.  Ch.  355. 


DISTRICT    OF    COLUMBIA. 

.    Code    of    1911. 
(With   Amendments   to   1914.) 

Sec.  369.  Investment  of  Funds. — Whenever,  under  the 
provision  of  a  will,  it  shall  be  necessary  for  an  executor  or  an 
administrator  cum  testamento  annexo  to  retain  in  his  hands 
the  personal  estate' or  any  part  thereof  after  all  just  claims 
are  discharged,  as  where  money  or  some  other  thing  is 
directed  to  be  paid  at  a  distant  period  or  upon  a  contin- 
gency, the  probate  court  shall  have  the  power,  on  the  appli- 
cation of  such  executor  or  administrator  or  of  a  party  in- 
terested, to  decree  or  give  directions  in  relation  thereto;  and 
it  shall  be  the  duty  of  said  executor  or  administrator  to  apply 
to  the  said  probate  court,  and  the  said  court  shall  have  full 
power  to  decree  or  direct  what  part  of  the  personal  estate 
shall  be  retained  or  appropriated  for  the  purpose  and  in  what 
manner  it  shall  be  disposed  of,  and  the  legacy  or  benefit  in- 
tended by  the  will  shall  be  secured  to  the  person  to  be  entitled 
at  a  future  period  or  contingency,  and  how  the  necessary  part 
of  the  personal  estate  to  be  appropriated  for  the  purpose 
shall  be  prevented  from  lying  dead  or  being  unproductive, 
and  how  it  shall  be  applied,  agreeable  to  the  intent  of  the  will 
or  the  construction  of  the  law,  in  case  the  contingency  shall 
not  take  place. 

Purchase  of  Trust  Property  by  Trustee. 

A  trustee  cannot  become  the  purchaser  of  trust  property  directly 
or  indirectly  unless  he  can  show  absolute  good  faith  and  honesty  in 
the  transaction.  Stephens  v.  Beall,  1  Mac  A.  38;  Beckett  v.  Tyler, 
3  Mac  A.  319. 

A  purchase  of  the  trust  property  by  a  trustee  for  his  own  use 
is  not  absolutely  void,  but  voidable.  It  may  be  ratified  by  the  parties. 
Quirk  v.  Liebert,  12  Appeal  394;  Hammond  v.  Hopkins,  143  U.  S.  224. 

65 


66  STATE   LAWS   AND   DECISIONS. 

Must  Act  in  Good  Faith. 

It  is  a  settled  rule  that  the  trustee  of  a  fund  for  management  and 
investment  must  act  in  good  faith  and  in  the  exercise  of  a  sound  dis- 
cretion. Johns  v.  Herbert,  2  Appeal  485. 

Sale  of  Non-Productive  Securities. 

A  testator  left  a  trust  estate  consisting  of  bonds  of  the  Chesapeake 
and.  Ohio  Canal  Company.  The  trustee  retained  the  bonds,  although 
they  had  produced  no  interest  for  a  number  of  years.  So  far  as  the 
principal  was  concerned,  however,  they  were  considered  safe.  The 
mere  fact  that  the  trustee  continued  to  hold  the  bonds  after  he  had 
been  requested  by  the  life  beneficiary  to  sell  was  not  sufficient  to 
render  him  liable  for  their  depreciation  in  value.  A  trustee's  conduct 
is  to  be  judged  by  the  situation  as  it  appeared  at  the  time  of  the 
transaction.  Johns  v.  Herbert,  2  Appeal  485. 

Power  to  Sell. 

The  power  of  a  trustee  to  sell  stocks  and  securities  is  not  to  be 
implied.  Johns  v.  Herbert,  2  Appeal  485;  Duncan  v.  Jandon,  15 
Wall.  165. 

Duty  to  Apply  to  Court  For  a  Change  of  Investment. 

Whenever  a  trustee  has  reason  to  believe  that  an  investment  may 
be  unsafe  or  unprofitable,  and  in  the  absence  of  express  authority  in 
the  trust  instrument,  he  should  apply  to  the  court  promptly  for  leave 
to  change  the  investment.  Johns  v.  Herbert,  2  Appeal  485;  Mades  v. 
Miller,  2  Appeal  455. 

Duty  to  Invest. 

When  money  remains  in  the  hands  of  trustees  beyond  a  reasonable 
time,  the  burden  is  upon  them  to  explain  and  justify  their  failure  to 
invest  it,  in  order  to  relieve  themselves  from  being  made  to  account 
for  the  interest  thereon.  Mades  v.  Miller,  2  Appeal  455. 

Mingling  Trust  Funds.  . 

Trustees  who  mingle  trust  funds  with  their  own  or  have  made  use 
of  the  money  themselves,  or  have  been  negligent  in  not  paying  the 
money  over  or  in  not  investing  it  so  as  to  render  it  productive,  are 
chargeable  with  interest.  Mades  v.  Miller,  2  Appeal  455. 

Purchase  at  His  Own  Sale. 

A  trustee  may  purchase  at  a  judicial  sale  brought  about  by  a  third 
party,  which  he  had  taken  no  part  in  procuring,  and  over  which  he 
could  not  have  had  control.  Starkweather  v.  Jenner,  27  Appaal  348; 
Twin-Lick  Oil  Co.  v.  Marbury,  91  U.  S.  587. 


FLORIDA. 

TRUSTEES    GENERALLY. 

Laws    of    1906. 
(With    Amendments   to   1914.) 

Sec.  2717.  Deposit  in  Bank — Bank  Stock. — Executors,  ad- 
ministrators, trustees  or  guardians  may  deposit  the  funds  held 
by  them  with  such  company  (Banking  Company)  or  invest 
the  same  in  its  capital  stock  for  the  benefit  of  the  estate  of 
their  testators,  intestates,  trusts  or  wards. 

Sec.  2433.  Executors  and  Administrators. — Executors  and 
administrators  may,  by  leave  of  the  court,  retain  in  their 
possession  the  money  of  any  minor,  paying  for  the  same  lawful 
interest,  or  shall,  under  the  direction  of  the  court,  put  out 
the  moneys  of  minors  at  interest,  upon  such  mortgage  se- 
curity, or  on  United  States  or  state  bonds,  or  stocks,  as  said 
court  shall  allow,  and  if  such  security  be  taken  bona  fide  and 
without  fraud,  and  shall  prove  insufficient,  it  shall  be  the  loss 
of  the  minor ;  but  if  no  good  security  can  be  found  on  which 
to  put  out  the  said  money  at  interest,  the  said  executor  or 
administrator  shall  only  be  responsible  for  the  principal;  and 
at  the  end  of  each  year  the  interest  due,  if  not  paid,  shall 
be  made  principal;  and  when  the  executor  or  administrator 
retains  the  money  on  interest  himself,  the  same  rule  shall  be 
observed,  the  interest  being  added  to  the  principal  annually; 
but  executors  and  administrators  shall  not  be  liable  to  pay 
interest,  except  on  the  surplus  of  the  estate  of  the  deceased 
remaining  in  their  hands  and  unemployed  as  aforesaid,  after 
the  settlement  of  their  accounts. 

Sec.  2612.  Guardians.  Investment  of  Moneys. — Guar- 
dians may  by  leave  of  the  court  retain  in  their  possession  the 
money  of  any  infant,  paying  for  tb.e  same  lawful  interest, 
or  shall  under  the  direction  of  the  court  put  out  the  money 

67 


68  STATE  LAWS  AND  DECISIONS. 

of  the  infant  at  interest  upon  such  mortgage  security,  or 
in  United  States  bonds  or  state  bonds  of  any  state,  as  said 
court  shall  direct,  and  if  such  security  be  taken  bona  fide  and 
without  fraud,  and  shall  prove  insufficient,  it  shall  be  the  loss 
of  the  infant ;  but  if  no  good  security  can  be  found  on  which 
to  put  out  the  said  money  at  interest,  said  guardian  shall  only 
be  responsible  for  the  principal,  but  the  day  of  payment  of 
that  money  so  put  out  at  interest  on  private  security  at  any 
time  shall  not  exceed  one  year  from  the  date  of  the  obliga- 
tion or  other  security  given  for  the  same  and  also  at  the  end 
of  each  year  the  interest  due  if  not  paid  shall  be  made  prin- 
cipal. "When  the  guardian  retains  the  money  on  interest  him- 
self the  same  rule  shall  be  observed,  the  interest  being  added 
to  the  principal  annually,  but  guardians  shall  not  be  liable 
to  pay  interest  except  on  the  surplus  of  the  estate  remaining 
in  their  hands  and  unemployed  as  aforesaid,  after  the  settle- 
ment of  their  accounts. 

Continuing  Business,  Laws  of  1911,  Ch.  6215.  Sec.  1. — 
In  all  cases  where  a  person  shall  have  died  while  engaged  in 
any  trade  or  business,  the  Circuit  Courts  of  this  state  are  em- 
powered to  authorize  the  curator,  administrator  or  executor 
of  the  estate  of  such  deceased  person  to  continue  and  carry 
on  such  trade  or  business  for  a  reasonable  time,  under  the 
supervision  of  such  court  and  to  require  such  security  or  ad- 
ditional security  of  such  curator,  administrator  or  executor, 
as  the  Circuit  Judge  may  deem  proper. 

Sec.  2.  Before  any  order  shall  be  made  authorizing  the 
continuance  of  the  trade  or  business  of  the  deceased  person, 
as  provided  for  in  Section  1  of  this  Act,  the  curator,  admin- 
istrator or  executor  of  such  estate  by  a  verified  petition,  shall 
affirmatively  and  clearly  allege  and  set  forth  sufficient  facts 
to  make  it  appear  to  the  court  that  to  prevent  great  loss 
to  the  estate  it  is  necessary  to  continue  such  trade  or  busi- 
ness of  the  deceased. 


FLORIDA.  69 

TRUST    COMPANIES. 

Laws    of    1911,    Ch.    6155. 
(With   Amendments   to    1914.) 

Investment  of  Trust  Funds. — Part  of  Section  4,  relating  to 
investment  of  trust  funds  by  trust  companies,  provides  that 
no  trust  company  shall  have  power  to  invest  such  funds  or 
to  make  loans  upon  bills,  notes  or  other  evidences  of  debt, 
except  to  a  county,  city,  town,  municipality  and  county  or 
school  boards  of  this  state,  unless  the  same  shall  be  secured 
by  first  mortgage  upon  real  estate  not  to  exceed  sixty  per 
centum  of  the  value  of  such  real  estate,  or  by  other  approved 
securities,  the  actual  value  of  which  other  approved  securities 
shall  at  all  times  exceed  by  at  least  twenty  per  centum  of  the 
amount  loaned  on  the  same.  And  no  moneys  received  in  trust 
shall  be  mingled  with  investments  of  capital  stock  or  other 
moneys  or  property  belonging  to  such  corporation. 

Statutes   Mandatory. 

It  will  be  observed  that  the  statute  not  only  restricts  the  powers 
of  an  executor,  but  as  a  further  protection  to  the  interests  of  minors 
requires  the  sanction  and  approval  of  the  court  of  probate.  Moore  v. 
Hamilton,  4  Fla.  112. 

Section  2433  was  intended  to  embrace  all  money  belonging  to  an 
estate  being  in  process  of  administration.  The  provision  of  the  statute 
requiring  loans  to  be  secured  by  mortgage  is  mandatory,  and  if  an 
executor  disregards  the  requirements  and  makes  a  loan  upon  personal 
security  he  does  so  at  his  peril.  Moore  v.  Hamilton,  4  Fla.  112;  Moore 
v.  Felkel,  7  Fla.  44. 

May  Not  Invest  in  Personal  Security. 

Since  the  statutes  of  Florida  are  mandatory,  it  follows  that  a 
trustee  may  not  invest  the  trust  fund  in  personal  security.  Moore  v. 
Hamilton,  4  Fla.  112. 

Failure  to  Obtain  Approval  of  Judge  of  Probate. 

Investments  which  are  not  authorized  by  law  or  which  have  not 
been  approved  by  the  judge  of  probate  may  be  accepted  or  rejected 
by  the  beneficiaries.  Sanderson's  Adm'rs.  v.  Sanderson,  17  Fla.  820. 

Trustee  May  Not  Purchase  at  Sale  of  Estate. 

A  trustee  may  not  purchase  at  a  sale  of  the  estate  of  the  bene- 
ficiary although  the  sale  is  at  public  auction.  The  beneficiary  may 


70  STATE   LAWS   AND   DECISIONS. 

set  aside  the  sale  whether  made  in  good  faith  or  not.     Bellamy  v.  Bel- 
lamy's Admr.,  6  Fla.   62. 

Trustee  May  Not  Profit  from  the  Estate. 

A  trustee  may  not  invest  for  his  own  interest  or  profit  from  the 
estate  either  directly  or  indirectly.  Lainhart  v.  Burr,  49  Fla.  315. 

Remedy  of  Beneficiary  in  Case  of  Unauthorized  Investment. 

Where  a  guardian  invests  in  securities  which  are  doubtful  and  not 
sanctioned  by  the  court,  a  beneficiary  may  refuse  to  receive  the 
securities  and  may  rely  on  the  bond.  May  v.  May,  19  Fla.  373. 

Deposit  in  Bank. 

A  trustee  who  deposits  money  in  a  bank  and  permits  it  to  remain 
uninvested  is  chargeable  with  interest,  unless  it  appears  that  no  safe 
security  could  be  found.  Eppinger  v.  Canepa,  20  Fla.  262. 


GEORGIA. 

TRUSTEES     GENERALLY. 

Code    of    1911. 
(With   Amendments   to   1914.) 

Sec.  3758.  Trustee  to  Report  Sale  and  Reinvestment. — 
In  all  cases  where  a  judge  in  term  by  order,  or  by  decree  based 
on  the  verdict  of  a  jury,  or  by  order  in  vacation,  shall  order 
or  allow  any  trust  property  to  be  sold,  it  shall  be  the  duty 
of  the  court,  or  judge  signing  the  order,  to  require  the  trus- 
tee, within  sixty  days  from  the  date  of  said  order,  to  file 
and  have  recorded  in  the  office  of  the  clerk  of  the  superior 
court  of  the  county  having  jurisdiction  of  said  trust  prop- 
erty, a  written  report  on  oath  of  his  actings  and  doings 
under  said  order,  with  the  name  of  the  purchaser  of  the  prop- 
erty, the  price  at  which  the  same  was  sold,  together  with  a 
description  of  the  property  in  which  the  proceeds  have  been 
reinvested,  the  price  paid,  and  the  name  of  the  person  from 
whom  the  same  was  bought,  if  said  proceeds  have  been  re- 
invested, and  if  not,  the  reason  therefor. 

If  the  proceeds  have  been  reinvested,  the  judge  shall  pass 
such  order  as  to  him  shall  seem  best,  confirming  the  same 
or  ordering  a  new  investment.  If  said  proceeds  have  not  been 
reinvested,  the  judge  shall  issue  such  order  as  shall  be  neces- 
sary, and  require  said  trustee  to  report  within  sixty  days  from 
said  last-named  order,  as  hereinbefore  required. 

Sec.  3759.  Penalty  for  Failure  to  Report. — In  case  any 
trustee  or  other  person  making  a  sale  as  herein  provided  shall 
fail,  neglect,  or  refuse  to  make  said  report  and  reinvestment 
as  herein  provided,  the  judge  shall  cause  a  rule  to  be  issued 
against  said  trustee  or  other  person  making  said  sale,  return- 
able at  a  time  therein  stated,  and  upon  the  hearing  thereof 
shall  compel  the  trustee  to  reinvest  said  funds  under  the 

71 


72  STATE   LAWS   AND   DECISIONS. 

direction  of  the  court,  upon  pain  of  being  attached  for  con- 
tempt and  committed  until  the  same  is  done. 

Sec.  3760.  Purchasers  shall  in  no  case  be  required  to  see 
to  a  reinvestment  of  any  proceeds  of  such  sales;  but  guar- 
dians ad  lit&m  and  all  other  persons  sui  juris,  parties  to 
the  proceedings  in  which  leave  to  sell  has  been  granted,  shall 
be  bound  to  see  to  said  reinvestment  and  report,  or,  upon 
the  failure  of  the  trustee  to  reinvest  and  report,  shall  be 
bound  to  have  the  failure  to  obey  said  order  called  to  the 
attention  of  the  court  for  its  action. 

Sec.  3763.  Investments. — Any  trustee  holding  trust  funds 
may  invest  the  same  in  stocks,  bonds,  or  other  securities  issued 
by  this  state,  making  a  true  return  of  the  price  paid  and  time 
of  purchase.  Such  investments  shall  be  free  from  taxation 
so  long  as  held  for  the  trust  estate.  Any  other  investments 
of  trust  funds  must  be  made  under  an  order  of  the  superior 
court,  either  in  term  or  granted  by  the  judge  in  vacation, 
or  else  at  the  risk  of  the  trustee. 

Sec.  3764.  May  Invest  in  State  Securities  at  Less  Than 
Seven  Per  Cent. — Executors,  administrators,  guardians  and 
trustees  may  invest  trust  funds  in  stocks,  bonds  and  other 
securities  issued  by  this  state,  bearing  a  lower  rate  of  in- 
terest than  seven  per  cent  per  annum,  and  shall,  in  the  set- 
tlement of  their  accounts  on  the  funds  so  invested,  be  charge- 
able with  no  greater  interest  than  that  received  from  the 
state :  Provided,  that  such  executor,  administrator,  guardian 
or  trustee  shall,  within  thirty  days  after  such  investment, 
make  a  return  to  the  Ordinary  of  the  amount  and  character 
of  the  bonds  purchased  and  the  price  paid. 

Sec.  3765.  Investments  in  Validated  County  or  Municipal 
Bonds. — Executors,  administrators,  guardians  and  trustees  are 
authorized  to  invest  trust  funds  in  any  county  or  municipal 
bonds  of  this  state,  which  have  been  validated  as  required 
by  law  for  the  validation  of  county  and  municipal  bonds, 
upon  the  same  terms  and  conditions  as  they  are  now  au- 
thorized to  invest  trust  funds  in  state  bonds  and  securities. 

Sec.  4011.  Investments  by  Administrator. — When  from 
any  cause  an  administrator  is  compelled  to  hold  the  funds  of 


GEORGIA.  73 

the  estate  in  his  hands,  he  is  authorized  to  invest  the  same 
in  stocks,  bonds  or  other  securities  issued  by  this  state,  or 
(by  leave  of  the  Ordinary)  in  bonds  issued  by  the  proper  au- 
thorities of  the  cities  of  Savannah  and  Augusta.  In  such  case 
he  shall,  within  twelve  months  thereafter,  make  a  legal  re- 
turn thereof,  in  which  shall  be  set  forth  the  price  paid,  the 
time  of  the  purchase,  and  the  name  of  the  seller.  If  any 
executor  or  trustee  has  in  his  hands  money  as  the  separate 
estate  of  a  married  woman,  absolutely  or  for  life,  he  may, 
under  the  direction  of  the  superior  court,  invest  such  funds 
in  land. 

Sec.  4012.  May  Continue  Business  of  Deceased. — An  ad- 
ministrator may  exercise  his  discretion  in  continuing  the  busi- 
ness of  his  intestate  until  the  expiration  of  the  current  year. 
Up  to  the  time  of  sale  or  distribution  the  administrator 
must  manage  and  dispose  of  the  property  of  the  estate  for 
the  best  interest  of  the  estate. 

Sec.  4008.  Guardians  and  Trustees  May  Invest  in  Land. — 
Guardians,  trustees,  executors  and  administrators  are  au- 
thorized to  invest  funds  held  by  them  as  such  guardians, 
trustees,  executors  and  administrators  in  lands:  Provided 
an  order  to  that  effect  be  first  obtained  from  the  judge  of 
the  superior  court,  who  is  authorized  to  consider  and  pass 
upon  such  applications  either  in  term  time  or  vacation. 

Changing  Investments. 

A  trustee  may  change  the  investments  of  the  estate  where  it  is 
manifestly  for  the  interest  of  the  beneficiaries,  but  if  he  does  so  with- 
out an  order  of  court  it  is  at  his  own  risk,  and  he  will  be  liable  for 
the  consequences.  Cornwise  v.  Bourgum,  2  Ga.  Dec.  15. 

But  where  a  trustee  changes  the  investment  with  the  consent  of 
the  beneficiary  who  is  of  legal  age,  he  is  not  liable  for  loss.  Campbell 
v.  Miller,  38  Ga.  304. 

May  Not  Reap  Personal  Benefit  from  the  Estate. 

Where  power  is  given  a  trustee  to  sell  and  reinvest,  he  must  invest 
for  the  use  of  the  beneficiary  alone  and  not  for  any  personal  benefit. 
Crowley  v.  Crouch,  114  Ga.  135. 

Statute  Construed. 

Section  2304  (3763)  of  the  revised  code  provides  that  "any  trustee 
holding  trust  funds  may  invest  the  same  in  stocks,  bonds  or  other 


74  STATE  LAWS  AND  DECISIONS. 

securities  issued  by  this  state,  making  a  true  return  of  the  price 
paid  at  the  time  of  purchase.  Such  investments  shall  be  held  free 
from  taxation  so  long  as  held  for  the  trust  estate.  Any  other  invest- 
ments of  trust  funds  must  be  made  under  an  order  of  the  superior 
court  within  the  term,  or  granted  by  the  judge  in  vacation,  or  else 
at  the  risk  of  the  trustee."  This  section -of  the  statute  was  passed 
in  1863  to  aid  the  state  in  raising  war  money  and  was  held  to  apply 
to  guardians  as  well  as  other  trustees.  Brown  v.  Wright,  39  Ga.  101. 

Investment  in  Trust  Company  Stock. 

Although  the  statute  of  Georgia  does  not  authorize  investment 
of  trust  funds  in  corporate  stock,  a  trust  company  which,  upon  petition 
of  the  beneficiary,  invests  trust  funds  in  its  own  stock  and  under  an 
order  of  a  court  of  chancery,  is  protected  against  loss.  Since  there 
was  no  fraud,  it  was  immaterial  whether  an  officer  of  the  company 
advised  the  beneficiary  as  to  its  condition.  Haddock  v.  Bank,  66 
Ga.  496. 

Confederate  Bonds. 

Investments  in  confederate  bonds  were  held  to  be  legal.  Walker  v. 
Walker,  66  Ga.  253. 

Trustee  Protected  Where  He  Exercises  Good  Faith. 

When  a  trustee  is  given  discretion  to  lend  money  or  not  as  he 
may  deem  proper,  and  lends  money  to  persons  solvent  at  the  time, 
using  such  discretion  and  diligence  as  he  exercises  in  his  own  business, 
he  should  not  be  held  responsible  for  loss.  Walker  v.  Walker,  42 
Ga.  135. 

Ratification  of  Illegal  Investment. 

Beneficiaries  may  ratify  an  illegal  investment  by  a  trustee,  but 
they  cannot  repudiate  part  of  the  investment,  and  at  the  same  time 
obtain  the  fruits  of  another  part.  Howard  v.  Cassels,  105  Ga.  412. 

Personal  Securities. 

The  duty  of  the  trustee  being  to  preserve  the  estate,  he  may  not 
take  an  unsecured  note  even  from  the  husband  of  the  beneficiary  and 
his  partner.  Kent  v.  Plumb,  57  Ga.  207. 

Trustee  May  Not  Purchase  Trust  Property. 

Trustees  may  not  deal  with  each  other  in  the  trust  property, 
neither  may  they  sell  any  portion  of  the  trust  estate  to  another 
trustee  unless  the  consent  of  the  beneficiaries  be  obtained.  Cleghorn 
v.  Love,  24  Ga.  591. 


HAWAII. 

TRUST    COMPANIES. 

Laws    of   1905. 
(With   Amendments   to   1914.) 

Sec.  6.  All  investments  of  money  received  by  any  trust 
company  upon  trust  account,  or  in  any  fiduciary  capacity, 
shall  be  at  its  sole  risk,  and  for  all  losses  of  such  money  the 
capital  stock,  property  and  effects  of  such  corporation  shall 
be  absolutely  liable,  unless  the  investments  are  such  as  the 
courts  recognize  as  proper  when  made  by  an  individual  acting 
as  trustee  or  in  like  fiduciary  capacity;  or  are  such  as  are 
permitted  in  and  by  the  instrument  or  words  creating  or  de- 
fining the  trust. 

Guardian. — There  are  no  specific  provisions  as  to  the  in- 
vestment of  the  ward's  estate  by  a  guardian.  The  statutes 
provide  that  the  guardian  must  manage  the  estate  for  the 
benefit  of  the  ward  and  that  in  case  of  a  necessity  for  sale 
and  reinvestment,  the  guardian  shall  obtain  an  order  of 
court  and  shall  invest  the  proceeds  in  the  best  possible  man- 
ner. Laws  of  1905,  Sees.  2314,  2326-2328. 

Must  Follow  Directions  of  Trust  Instrument. 

It  is  the  duty  of  trustees  to  follow  the  directions  of  the  trust  in- 
strument. In  re  Estate  of  Lunalilo,  4  Ha.  162. 

Trust  Funds  Must  Be  Kept  Separate. 

Trust  funds  should  not  be  merged  in  the  private  business  of 
trustees,  but  should  be  kept  separate  and  invested  in  the  best  se- 
curities the  country  affords.  In  re  Estate  of  Neville,  4  Ha.  289. 

Good   Faith   and    Prudence. 

No  statutory  provision  limiting  the  investment  of  trust  funds 
exists  in  the  Hawaiian  Islands.  A  trustee  is  not  liable  for  loss  if  he 
acts  with  honesty,  prudence  and  faithfulness,  and  exercises  sound 
discretion.  In  re  Estate  of  Banning,  9  Ha.  453. 

75 


76  STATE  LAWS  AND  DECISIONS. 

Corporate  Bonds. 

Where  the  agent  of  a  trustee  invested  in  corporate  bonds,  the 
trustee  was  held  responsible  for  loss,  because  he  had  delegated  his 
power.  The  trustee  was  not  criticised  by  the  court  for  the  character 
of  the  investment.  In  re  Estate  of  Banning,  9  Ha.  453. 

Trustees  are  not  limited  to  public  securities  and  mortgages  on 
real  estate.  They  may  invest  in  corporate  bonds  where  such  bonds 
are  secured  by  mortgages  on  real  and  personal  property  and  are  re- 
garded by  prudent  men  as  safe.  Guardianship  of  Parker,  14  Ha.  347. 


IDAHO. 

TRUSTEES     GENERALLY. 

Code     of    1912. 
(With   Amendments   to   1914.) 

Sec.  5605.  Executors  and  Administrators. — Pending  the 
settlement  of  any  estate,  on  the  petition  of  any  party  in- 
terested therein,  and  upon  good  cause  shown  therefor,  the 
court  may  order  any  moneys  in  the  hands  of  the  executors 
or  administrators  to  be  invested  for  the  benefit  of  the  estate 
in  securities  of  the  United  States  or  of  this  state.  Such  order 
can  only  be  made  after  publication  of  notice  of  the  petition 
in  some  newspaper  to  be  designated  by  the  court  or  judge 
thereof. 

Guardian.— Section  5800,  of  the  code  of  Idaho  for  1912,  re- 
ferring to  the  duty  of  a  guardian,  provides  "if  the  estate  is 
sold  for  the  purpose  of  putting  out  or  investing  the  proceeds, 
the  guardian  must  make  the  investment  according  to  his  best 
judgment,  or  in  pursuance  of  any  order  that  may  be  made  by 
the  probate  court." 

Sale  For  Investment  by  Guardian. — Section  5798  pro- 
vides that  "when  it  appears  to  the  satisfaction  of  the  court, 
upon  the  petition  of  the  guardian,  that,  for  the  benefit  of  his 
ward,  his  real  estate  or  some  part  thereof  should  be  sold  and 
the  proceeds  thereof  put  out  at  interest,  or  invested  in  some 
productive  stock,  or  in  the  improvement  or  security  of  any 
other  real  estate  of  the  ward,  his  guardian  may  sell  the  same 
for  such  purpose,  upon  obtaining  an  order  therefor." 

Sec.  2965.  This  section  provides  that  "any  executor,  ad- 
ministrator, guardian  or  trustee,  having  the  custody  or  control 
of  any  bonds,  stocks,  securities  or  other  valuables  belonging  to 
others,  shall  be  authorized  to  deposit  the  same  for  safe  keep- 

77 


78  STATE   LAWS   AND   DECISIONS. 

ing  with  said  companies."     (Guaranty,  title  and  trust  com- 
panies.) 

Sec.  5582.  This  section  provides  that  an  executor  or  ad- 
ministrator shall  not  make  profit  by  the  increase,  nor  suffer 
loss  by  the  decrease,  or  destruction,  without  his  fault,  of  any 
part  of  the  estate.  He  must  account  for  the  excess  when  he 
sells  any  part  of  the  estate  for  more  than  the  appraisement, 
and  if  any  is  sold  for  less  than  the  appraisement,  he  is  not 
responsible  for  the  loss,  if  the  sale  has  been  justly  made. 

Note. — There  are  no  important  decisions  by  the  higher  courts  of 
Idaho,  but  the  statutes  are  taken  largely  from  California,  and  it  is  fair 
to  assume  that  the  California  rules  prevail.  See  also  Part  I  herein. 


ILLINOIS. 

TRUST    COMPANIES. 

Laws    of    1909. 
(With   Amendments   to   1914.) 

Trust  Companies  Not  Required  to  Give  Bond — Responsi- 
bility for  Investments. — The  laws  of  1909  provide  that  a  trust 
company  shall  not  be  required  to  give  any  bond,  or  security 
in  case  of  any  appointment  hereinbefore  provided  for,  except 
as  hereinafter  provided,  but  shall  be  responsible  for  all  in- 
vestments which  shall  be  made  by  it  of  the  funds  which  may 
be  entrusted  to  it  for  investments  by  such  court  and  shall  be 
further  liable  as  natural  persons  in  like  positions  now  are,  and 
as  hereinafter  provided.  The  amount  of  money  which  any 
such  corporation  shall  have  on  deposit  at  any  time  shall  not 
exceed  ten  times  the  amount  of  its  paid  up  capital  and  sur- 
plus, and  its  outstanding  loans  shall  not  at  any  time  exceed 
said  amount. 

TRUSTEES    GENERALLY. 

Laws    of    1905. 

Investments  of  trust  funds  by  trustees  may,  when  not 
otherwise  provided  by  the  will,  deed,  decree,  gift,  grant,  or 
other  instrument  creating  or  fixing  the  respective  trust,  be  in 
the  bonds  of  the  United  States,  or  of  any  of  the  states  of  the 
United  States,  or  in  the  first  mortgages  upon  real  estate  in  any 
state,  or  in  the  bonds  of  any  county,  city  or  municipality  in  any 
state,  or  in  the  first  mortgage  bonds  of  any  corporation  of  any 
state  upon  which  no  default  in  payment  of  interest  shall  have 
occurred,  for  a  period  of  five  years,  but  no  trustee  shall  be 
authorized  by  this  act  to  invest  trust  funds  in  any  bonds  in 
which  cautious  and  intelligent  persons  do  not  invest  their 
own  money,  and  any  trustee  may  continue  to  hold  any  in- 

79 


80  STATE   LAWS   AND   DECISIONS. 

vestment  received  by  him  under  the  trust,  or  any  increase 
thereof. 

GUARDIANS. 

Eevised    Statutes    of    1912. 

Chapter  64,  Section  22.  Investment  of  Ward's  Money. — 
It  shall  be  the  duty  of  the  guardian  to  put  and  keep  his 
ward's  money  at  interest  upon  security  to  be  approved  by 
the  court,  or  by  investing,  on  approval  of  the  court,  the  same 
in  United  States  bonds,  or  in  the  bonds  of  any  county  or  city 
which  are  not  issued  in  aid  of  railroads,  and  where  the  laws 
do  not  permit  said  counties  or  cities  to  become  indebted  in 
excess  of  five  per  cent  of  the  assessed  valuation  of  the  prop- 
erty for  taxation  therein,  and  where  the  total  indebtedness 
of  such  county  or  city  does  not  exceed  five  per  cent  of  the 
assessed  valuation  of  property  for  taxation  at  the  time  of 
such  investment.  Personal  security  may  be  taken  for  loans 
not  exceeding  one  hundred  dollars.  Loans  upon  real  estate 
shall  be  secured  by  first  mortgage  thereon  and  not  to  exceed 
one-half  the  value  thereof.  No  mortgage  loan  shall  be  made 
for  a  longer  time  than  five  years  nor  beyond  the  minority  of 
the  ward:  Provided,  the  same  may  be  extended  from  year 
to  year  without  the  approval  of  the  court.  The  guardian 
shall  be  chargeable  with  interest  upon  any  money  which  he 
shall  wrongfully  or  negligently  allow  to  remain  in  his  hands 
uninvested  after  same  might  have  been  invested. 

Investments  in  Other  States. 

It  seems  that  if  a  trustee  is  given  broad  powers  of  investment, 
the  Illinois  courts  recognize  his  right  to  invest  in  securities  outside 
of  the  state.  Section  1  of  the  Statute  of  1905,  concerning  investments 
by  trustees,  confers  power  to  invest  in  securities  outside  of  the  state, 
and  this  appears  to  authorize  investments  beyond  the  borders  of  the 
state,  not  only  in  real  estate  mortgages  but  in  real  estate.  Merchants 
Loan  &  Trust  Co.  v.  Northern  Trust  Co.,  250  111.  86. 

Trustee  Liable  if  He  Invests  in  His  Own  Name. 

A  trustee  who  invests  trust  funds  in  his  own  name  and  not  in 
his  name  as  trustee  is  liable  for  a  breach  of  trust,  regardless  of  his 
intention.  White  v.  Sherman,  168  111.  589. 


ILLINOIS.  81 


Business  or  Trade. 


A  trustee  has  no  power  to  use  trust  funds  in  operating  a  coal 
mine.  Butler  v.  Butler,  164  -111.  171. 

Interest. 

A  trustee,  who  is  guilty  of  a  breach  of  trust,  is  liable  for  in- 
terest, with  annual  rests.  White  v.  Sherman,  168  111.  589. 

Power  to  Mortgage. 

A  trustee  who  is  given  no  authority  to  sell  or  convey  the  property 
by  the  trust  instrument  has  no  power  to  mortgage.  Summers  v.  Higley, 
191  111.  193. 

Power  to  Lease. 

A  trustee  who  is  given  power  to  manage,  rent  and  lease  property, 
has  power  to  execute  ordinary  leases,  but  not  to  sell  the  property  or 
make  leases  which  amount  to  a  sale,  such  as  a  lease  to  operate  for 
oil  or  gas.  Ohio  Oil  Co.  v.  Daughetee,  240  111.  361. 

Corporate    Stock. 

Where  a  trustee  is  given  broad  power  as  to  choice  of  investments 
and  the  creator  of  the  trust  has  invested  in  stock  of  private  cor- 
porations, investments  in  such  stock  may  be  made  by  the  trustee. 
Merchants  Loan  &  Trust  Co.  v.  Northern  Trust  Co.,  250  111.  86. 

A  trustee  should  not  invest  trust  funds  in  the  stock  of  a  private 
corporation.  Penn  v.  Folger,  182  111.  76. 

A  trustee  may  not  invest  in  speculative  railway  stocks,  or  stocks 
of  private  corporations.  Sherman  v.  White,  62  111.  App.  271;  Aff'd., 
168  111.  589. 

Investment   in   a   Partnership. 

An  administrator  with  the  will  annexed  who  held  national  bank 
stock  in  trust  had  no  authority  to  enter  into  an  agreement  to  change 
the  bank  into  a  partnership  and  continue  the  investment  in  this  form. 
As  a  general  rule  a  trustee  should  not  make  changes  in  investments 
unless  ordered  by  a  court  of  chancery.  Penn  v.  Folger,  182  111.  76. 

Continuing  Investments  Made  by  Creator  of  Trust. 

The  fact  that  the  creator  of  the  trust  has  invested  in  certain 
securities  may  well  be  taken  into  consideration  when  the  trustees 
are  required  to  exercise  their  judgment.  Merchants  Loan  &  Trust  Co. 
v.  Northern  Trust  Co.,  250  111.  86. 


82  STATE   LAWS   AND   DECISIONS. 

Acquiescence  by  Beneficiary  in  Investments. 

Where  the  beneficiaries  are  of  age  they  may  acquiesce  in  an  in- 
vestment which  is  not  legal  for  a  trustee,  but  if  a  trustee  would  avail 
himself  of  this  defense,  he  must  show  that  all  of  the  details  of  the 
investment  were  fully  explained;  that  the  beneficiaries  understood  the 
nature  of  the  investment  and  that  they  gave  their  consent  to  it.  Failure 
of  the  beneficiaries  to  object  to  general  reports  or  statements  made 
by  the  trustee  does  not  constitute  acquiescence.  Sherman  v.  White, 
62  111.  App.  271;  Aff'd.,  168  111.  589. 


INDIANA. 

Statutes   of   1908. 
(With   Amendments   to   1914.) 

Sec.  4037.  Proceeds  of  Sale  of  Trust  Estate  After  an  Or- 
der of  Court. — It  shall  be  the  duty  of  the  trustee  to  safely  in- 
vest the  money  realized  from  such  sale  of  said  trust  property 
upon  good  real  estate  mortgage  security,  preserving  the  prin- 
cipal sum  from  loss  or  diminution,  and  paying  over  to  the 
cestuis  que  trust  the  interest  upon  said  principal  sum  during 
the  continuance  of  the  trust. 

Sec.  4953.  Sixth.  Loan  and  Deposit  Companies  Acting  as 
Trustee. — The  directors  of  any  such  corporation  shall  have 
discretionary  power  to  invest  all  moneys  received  by  it  on 
deposit  or  in  trust  in  any  such  personal  securities  as  are  not 
hereinafter  expressly  prohibited,  and  it  shall  be  held  respon- 
sible to  the  owners,  or  cestuis  que  trust,  of  such  moneys,  for 
the  validity,  regularity,  quality,  value  and  genuineness  of  all 
such  investments  and  securities  at  the  time  the  said  invest- 
ments are  so  made,  and  for  the  safe  keeping  of  the  evidences 
and  securities  thereof;  but  if  any  special  direction,  agreement 
or  trust  is  imposed  upon,  made  or  conferred  in  and  by  the 
order,  judgment  or  decree  of  any  court,  or  by  the  terms  and 
conditions  of  any  last  will  and  testament,  or  other  document, 
contract,  deed,  conveyance,  or  other  written  instrument,  as  to 
the  particular  manner  in  which,  or  the  particular  class  or 
kinds  of  security,  funds  or  property,  whether  real  or  per- 
sonal, the  same  shall  be  invested  in,  then  the  said  corporation 
shall  follow  and  carry  out  such  order,  judgment,  decree  or 
other  appointment,  contract,  deed,  conveyance  or  other 
written  instrument,  and  in  such  case  such  company  shall  not 
be  held  liable  or  responsible  for  any  loss,  damage  or  injury 
which  may  occur  or  be  incurred  by  any  person  or  cestuis  que 
trust  by  reason  of  its  performance  of  such  trust  as  aforesaid. 

83 


84  STATE   LAWS   AND   DECISIONS. 

Deposits  in  Bank. 

A  trustee  is  not  liable  merely  because  he  deposits  trust  funds  in 
a  private  bank  which  fails  or  because  the  bank  is  weak,  unless  he 
has  knowledge  of  the  bank's  condition  or  could  have  learned  of  the 
condition  by  the  exercise  of  ordinary  care  and  diligence.  Norwood, 
Admr.,  v.  Harness,  98  Ind.  134. 

Deposit  in  Trustee's  Individual  Name. 

A  trustee  who  deposits  trust  funds  in  a  bank  in  his  own  name  is 
liable  for  any  loss  which  occurs  by  reason  of  the  failure  of  the  bank. 
The  moment  he  takes  the  money  or  property  as  his  own  he  becomes 
liable.  Fletcher  v.  Sharpe,  108  Ind.  276;  Corya  v.  Corya,  119  Ind.  593; 
Gilbert  v.  Welsch,  75  Ind.  557;  Slauter  v.  Favorite,  107  Ind.  291. 

Trustee  May  Not  Profit  From  the  Estate. 

The  fiduciary  relation  of  an  executor  or  administrator  extends  to 
all  the  legatees,  and  he  cannot  purchase  the  legacy  of  any  one  either 
for  his  benefit  or  for  the  benefit  of  the  other  legatees.  Goodwin  v. 
Goodwin  Ex'r.,  48  Ind.  584. 

A  trustee  has  no  right  to  use  the  assets  in  his  possession  for  his 
personal  benefit,  and  one  who  purchases  from  him  with  notice  acquires 
no  equitable  rights.  One  who  knowingly  receives  trust  money  in  satis- 
faction of  the  individual  debt  of  the  trustee  is  a  party  to  the  fraud. 
Nugent  v.  Laduke,  87  Ind.  482;  Wallace  v.  Brown,  41  Ind.  436;  Fleece 
v.  Jones,  71  Ind.  340;  Eogers  v.  Zook,  86  Ind.  237. 

Corporate   Stock. 

An  investment  in  corporate  stock  is  nothing  more  than  an  invest- 
ment in  mere  personal  security  of  fluctuating  and  uncertain  character, 
and  when  not  made  under  the  direction  of  some  competent  authority 
is  a  well  recognized  violation  of  the  duty  of  a  trustee.  Tucker  v.  State 
ex  rel.  Hart,  72  Ind.  242. 

Bank  Stock. 

Where  a  will  directs  that  a  legacy  be  put  at  interest,  the  mean- 
ing is  that  the  fund  be  loaned  at  interest  or  invested  in  interest- 
bearing  security.  It  cannot  properly  be  said  that  shares  of  capital 
stock  in  a  bank  are  interest-bearing  securities.  Gilbert  v.  Welsch,  75 
Ind.  557. 

Loan  to  Eelative. 

It  is  not  fraud  per  se  for  a  trustee  to  loan  trust  funds  to  his 
own  son,  if  the  loan  is  legally  secured.  Caldwell  v.  Boyd,  109  Ind.  447. 


INDIANA.  85 

Transactions  Between  Trustee  and  Beneficiary. 

Transactions  between  beneficiary  and  trustee,  in  which  the  trustee 
gains  an  advantage,  are  looked  upon  with  suspicion.  Teegarden  v. 
Lewis,  145  Ind.  98. 

Continuing   Partnership. 

In  the  absence  of  express  conditions  to  the  contrary  in  the  articles 
of  agreement,  the  death  of  one  of  the  partners  works  a  dissolution 
of  the  partnership.  Consequently,  the  interest  of  the  deceased  in  the 
partnership  cannot  be  continued  as  an  investment  unless  there  is  ex- 
press permission  for  it  either  in  the  articles  of  partnership  or  in  the 
trust  instrument.  Eand  v.  Wright,  141  Ind.  226. 

Individual   Credit. 

Loans  made  on  the  credit  of  individuals  or  firms  without  security, 
or  with  doubtful  security,  are  ordinarily  at  the  risk  of  the  guardian. 
Line  v.  Lawder,  122  Ind.  548. 

Must  Keep  Funds  Separate. 

A  guardian  is  not  an  insurer  of  investments  made  by  him,  but  it 
is  his  duty  to  keep  the  trust  estate  separate  from  his  own  funds  and 
to  act  in  good  faith  and  to  exercise  the  prudence  of  men  diligent  in 
their  own  business.  Line  v.  Lawder,  122  Ind.  548. 

Duty  to  Have  Husband  and  Wife  Join  in  Mortgage. 

It  is  the  duty  of  the  trustee  to  see  that  husband  and  wife  both 
join  in  a  mortgage.  Otherwise  he  must  show  the  husband's  estate  has 
adequate  security.  Slauter  v.  Favorite,  107  Ind.  291. 

Second   Mortgages. 

A  mortgage  on  real  estate  subject  to  prior  liens  or  encumbrances 
is  not  a  safe  investment.  Shuey  v.  Latta,  90  Ind.  136. 

Guardian. 

Section  3068,  of  the  statutes,  gives  a  guardian  the  power  to 
"manage  the  estate  for  the  best  interests  of  the  ward,"  and  section 
3069  provides  that  the  proper  court  may  order  a  change  of  invest- 
ments. There  appears  to  be  no  definite  provision  as  to  the  securities 
in  which  a  guardian  may  invest. 

Duty  to  Invest. 

It  is  the  duty  of  a  guardian  to  invest  the  estate  of  the  ward 
which  comes  into  his  hands,  and  he  must  use  due  care  in  making 
investments.  State  v.  Saunders,  62  Ind.  562. 


86  STATE  LAWS  AND  DECISIONS. 

Diligence  in  Examining  Title. 

Ten  days  before  making  a  loan  of  his  ward's  money  the  guardian 
examined  the  title  to  property  and  found  it  clear.  The  borrower  was 
a  man  of  high  financial  reputation  and  it  was  not  known  at  the  time 
that  he  was  heavily  in  debt.  After  the  examination  of  title  by  the 
guardian  and  before  he  secured  his  mortgage,  the  owner  placed  a 
prior  mortgage  upon  the  property.  Under  the  circumstances  the  guardian 
was  not  negligent.  Slauter  v.  Favorite,  107  Ind.  291. 


IOWA. 

Code    of    1897. 
(With  Amendments  to   1914.) 

Sec.  364.  Investments — In  What  to  be  Made.— Where  in- 
vestments of  funds  are  to  be  made,  including  those  to  be 
made  by  executors,  administrators,  trustees  and  guardians, 
and  no  mode  of  investment  is  pointed  out  by  statute,  they 
may  be  made  in  the  stocks  or  bonds  of  this  state,  or  of 
those  of  the  United  States,  or  in  bond  or  mortgage  upon  real 
property  of  the  clear,  unencumbered  value  of  twice  the  in- 
vestment, or  under  order  of  court  in  bonds  issued  by  or  under 
the  direction  of  cities,  towns,  counties,  school  or  drainage  dis- 
tricts of  this  state.  As  amended  by  laws  of  1913. 

Sec.  365.  Security  Not  to  be  Changed  Without  Order. — 
"When  such  investment  is  made  by  order  of  any  court, 
the  security  shall  in  no  case  be  discharged,  impaired  or  trans- 
ferred without  an  order  of  the  court  to  that  effect,  entered 
on  the  minutes  thereof. 

Sec.  366.  Duty  of  Investor  Under  Order. — The  clerk  or 
other  person  appointed  in  such  cases  to  make  the  invest- 
ment must  receive  all  moneys  as  they  become  due  thereon, 
and  apply  or  reinvest  the  same  under  the  direction  of  the 
court,  unless  the  court  appoints  some  other  person  to  do  such 
acts. 

Sec.  3337.  Business  Continued. — The  court,  in  its  discre- 
tion, may  authorize  an  executor  or  administrator  to  continue 
the  prosecution  of  any  business  in  which  the  deceased  was 
engaged  at  the  time  of  his  death,  in  order  to  wind  up  his 
affairs  with  greater  advantage,  but  such  authority  shall  not 
exempt  him  from  returning  a  full  inventory  and  appraise- 
ment, and  making  reports,  as  in  other  cases. 

87 


88  STATE  LAWS  AND  DECISIONS. 


TRUST    COMPANIES. 

By  Chapter  152  of  the  Laws  of  1913  the  right  to  act  as 
trustees  was  conferred  upon  trust  companies  and  banks.  The 
law  requires  that  trust  funds  be  kept  separate  and  that  every 
such  corporation,  when  acting  as  executor,  administrator, 
guardian,  or  trustee,  shall  have  the  same  rights  and  be  subject 
to  the  same  laws  as  an  individual  acting  in  the  same  capacity. 

Deposit  in   Bank  Pending  Investment. 

A  trustee  who  deposits  trust  funds  in  a  reputable  bank  is  not 
liable  for  loss  which  may  occur  by  failure  of  the  bank.  But  the 
deposit  must  not  be  in  his  individual  name  or  mingled  with  other 
funds.  Officer  v.  Officer,  120  la.  389. 

Time  Allowed  for  Investment. 

Fifteen  months  is  too  long  a  time  for  a  fund  to  remain  on  de- 
posit. It  is  the  duty  of  the  trustee  to  keep  the  funds  properly  in- 
vested. Garner  v.  Hendry,  95  la.  44. 

Order  of   Court  as   a  Protection. 

Even  where  the  trustee  is  given  discretion  as  to  the  investments, 
the  courts  may  make  such  an  order  as  will  protect  the  trustee.  Dickey 
v.  Barnstable,  122  la.  572. 

Duty  of  Guardian  to  Obtain  Order  of  Court. 

Section  3200  of  the  Iowa  Code  requires  that  guardians  must  manage 
the  affairs  of  the  ward  "under  proper  orders  of  the  court  or  judge 
thereof."  The  statute  seems  to  be  controlling  even  where  the  guar- 
dian has  invested  in  mortgage  security.  The  investment  is  voidable 
until  approved  by  a  court  order.  The  guardian  cannot,  as  at  common  law, 
loan  his  ward's  money,  or  invest  it  without  such  an  order.  Foteaux  v. 
Lepage,  6  la.  123;  Garner  v.  Hendry,  95  la.  44;  Keed  v.  Lane,  96  la. 
454;  Easton  v.  Somerville,  111  la.  164;  Mclntire  v.  Bailey,  133  la.  418. 

Guardian  May  Not  Loan  to  Himself. 

A  guardian  may  not  loan  his  ward's  money  to  himself.  McKey- 
nolds  v.  Anderson,  69  la.  208. 

Bate  of  Interest. 

Six  per  cent  interest  is  all  that  should  be  allowed.  Where  a 
trustee  has  made  more,  he  will  be  charged  therewith;  where  nothing  is 


IOWA.  89 

shown,  he  will  be   charged  with   the    highest  legal  rate.     Foteaux   v. 
Lepage,  6  la.  123. 

May  Not  Mingle  Trust  Funds  with  His  Own. 

Mingling  of  trust  funds  with  his  own  amounts  to  a  conversion 
by  the  trustee  and  his  bondsmen  are  liable.  Mclntire  v.  Bailey,  133 
la.  418. 


KANSAS. 

TRUST    COMPANIES. 

Statutes    of    1909. 
(With   Amendments   to   1914.) 

4118.  Investment  of  Funds.  Sec.  50. — Any  life  insurance 
company,  or  any  trust  or  loan  company  heretofore  or  here- 
after organized  under  any  law  of  this  state,  may,  by  the  direc- 
tion and  consent  of  two-thirds  of  the  respective  boards  of 
directors,  or  finance  committee,  purchase  or  invest,  by  loan 
or  otherwise,  any  of  their  funds  in  bonds,  or  notes  and  mort- 
gages on  unencumbered  real  estate  worth  fifty  per  cent  more 
than  the  sum  so  loaned  thereon,  or  in  stocks  or  bonds  of 
the  United  States  or  of  this  state,  or  any  other  state,  or  in 
bonds  issued  by  any  county,  city,  town,  village  or  school  dis- 
trict of  this  city,  pursuant  to  any  law  of  this  state ;  and  any 
such  life  insurance  company  may  also  invest  its  funds  by  loans 
to  its  policy-holders  to  an  amount  not  exceeding  the  reserve 
held  by  such  company  upon  each  policy,  to  be  secured  by  the 
promissory  note  of  the  policy-holder,  and  the  assignment  to 
the  company  of  the  policy  upon  which  such  loan  is  made,  any- 
thing in  the  charter  of  any  of  such  companies  to  the  con- 
trary notwithstanding. 

Sec.  3590.  153.  Not  to  Profit  from  Estate.— No  profits 
shall  be  made  by  executors  or  administrators  by  the  increase, 
nor  shall  they  sustain  any  loss  by  the  decrease  or  destruction, 
without  their  fault,  of  any  part  of  the  estate. 

Loan  to  Firm  of  which  Trustee  is  a  Member. 

When  a  trustee  loans  trust  funds  to  a  partnership  of  which  he 
is  a  member,  with  the  knowledge  of  the  other  partners,  it  becomes  a 
partnership  debt,  and  the-  beneficiary  may  follow  the  fund  and  re- 
cover. Ellicott  v.  Barnes,  31  Kansas  170;  Bush  v.  Bush  &  Co.,  33 
Kansas  556. 

90 


KANSAS.  91 

Trustee  May  Not  Profit  from  the  Estate. 

The  purchase  of  trust  property  by  the  trustee  for  his  own  benefit 
is  generally  held  to  be  void,  even  if  he  paid  a  fair  price.  Frazier  v. 
Jeakins,  64  Kansas  615. 

Carrying   on  Business. 

A  trustee,  expressly  authorized  to  carry  on  the  business  of  the 
testator  for  a  time,  may  do  so  under  the  direction  of  the  probate 
court,  but  in  the  absence  of  such  authority  he  may  not  continue  the 
business  of  the  decedent.  Campbell  v.  Faxon,  73  Kansas  675. 

Guardian. 

A  guardian  must  lend  the  money  of  his  ward,  and  section  3975, 
of  the  Statutes  of  1909,  requires  him  to  obtain  an  order  of  court 
authorizing  the  investment. 


KENTUCKY. 

TEUST    COMPANIES    AND    TRUSTEES. 

Statutes    of    1909. 
(With  Amendments  to   1914.) 

Sec.  2254.    Funds  and  Capital.    How  to  be  Invested. — The 

capital  stock  of  a  trust  company,  and  the  funds  in  its  posses- 
sion, not  held  in  a  fiduciary  capacity,  may  be  invested  in  such 
manner  as  the  directors  deem  prudent  and  safe ;  and  the  funds 
held  in  fiduciary  capacity  shall  be  invested  under  the  order 
of  court,  or  in  such  manner  as  may  be  provided  by  law  for 
the  investment  of  other  trust  funds;  and  the  capital  stock 
shall  be  primarily  liable  for  the  obligations  of  the  corpora- 
tion in  its  fiduciary  capacity. 

Sec.  4168.  Investment  of  Funds  by  Fiduciary. — That  it 
shall  be  lawful  for  persons  or  corporations  holding  funds  in  a 
fiduciary  capacity  for  loan  or  investment,  to  invest  the  same 
in  real  estate,  mortgage  notes  or  bonds,  or  in  such  other 
interest-bearing  or  dividend-paying  securities  as  are  regarded 
by  prudent  business  men  as  safe  investments,  and  to  make 
loans  with  such  securities  as  collateral;  but  such  funds  shall 
not  be  invested  in  the  bonds  or  securities  of  any  railroad  or 
other  corporation,  unless  such  railroad,  or  other  corporation, 
has  been  in  operation  more  than  ten  years,  and,  during  that 
time,  has  not  defaulted  in  the  payment  of  principal  or  in- 
terest on  its  bonded  debt,  or  be  invested  in  the  bonds  of  a 
county,  district,  town  or  city  that,  within  ten  years,  has  de- 
faulted in  the  payment  of  the  interest  or  principal  of  its 
bonded  debt ;  and  a  fiduciary  shall  account  for  all  interest  or 
profit  received. 

Sec.  4169.  Sale  of  Bonds  and  Securities.  Purchaser  Pro- 
tected.— All  persons  or  corporations  holding  stocks,  bonds  or 
other  securities,  in  a  fiduciary  capacity  for  loan  or  invest- 

92 


KENTUCKY.  93 

ment,  shall  have  power  to  sell  and  transfer  the  same  when- 
ever in  the  judgment  of  such  fiduciary  such  sale  will  benefit 
the  trust  estate,  and  reinvest  the  proceeds  as  in  Section  4168 
of  this  chapter  authorized;  but  no  administrator  or  executor 
shall  sell  any  dividend-paying  stocks,  bonds  or  other  security 
which  the  decedent  owned  at  his  death,  until  so  ordered  by 
a  court  of  general  equity  jurisdiction  in  the  county  where 
letters  of  administration  was  granted  or  the  will  recorded; 
and  the  court,  or,  in  vacation,  the  judge  thereof,  may,  upon 
the  ex  parte  petition  of  said  fiduciary,  make  said  order  when- 
ever it  is  necessary  to  raise  funds  to  pay  the  debts  of  the 
decedent,  or  when  said  court  or  judge  may,  in  his  discretion, 
deem  necessary  for  the  protection  of  the  estate  or  the  interest 
of  the  beneficiary.  A  purchaser  in  good  faith  for  value  from 
such  fiduciary  shall  not  be  bound  to  look  to  the  application  of 
the  proceeds  of  sale,  nor  shall  a  corporation  in  which  stock 
held  by  a  fiduciary  is  sold,  as  herein  authorized,  be  liable  for 
transferring  such  stock  on  its  books  upon  the  order  of  such 
fiduciary. 

Sec.  4170.  Sale  or  Investment  to  Accord  with  Instrument 
Creating. — The  provisions  of  this  chapter  shall  not  be  con- 
strued to  permit  a  sale,  investment  or  loan  in  conflict  with  the 
provision  of  the  will,  deed  or  other  instrument  creating  the 
trust,  or  under  which  the  funds  or  property  may  be  held. 

Note. — The  statute  was  passed  in  1890  and  amended  in  1892,  and 
changed  the  previous  law  in  Kentucky,  by  which  investments  were  au- 
thorized only  in  bonds  of  the  United  States  or  the  State  of  Kentucky,  or 
some  county  or  city  of  the  Commonwealth,  paying  six  per  cent  interest. 
By  implication,  it  authorizes  the  loaning  of  money  on  or  investment  in 
bonds  or  securities  of  a  railroad  or  other  corporation  where  it  has  been 
in  operation  more  than  ten  years  and  has  not  defaulted  in  the  pay- 
ment of  the  principal  or  interest,  in  that  time,  of  its  bonded  debt,  and 
impliedly  authorizes  investment  in  bonds  of  county,  town  or  city  which 
has  not  defaulted,  in  ten  years,  in  the  payment  of  principal  or  in- 
terest of  its  bonded  debt.  It  also  expressly  authorizes  investment  in 
any  interest-bearing  or  dividend-paying  securities  that  are  regarded 
at  the  time  of  the  investment  by  prudent  business  men  as  safe  invest- 
ments. The  word  "securities"  as  used  here  apparently  means  stocks 
and  bonds,  the  word  "dividend"  evidently  referring  to  stocks. 


94  STATE   LAWS   AND   DECISIONS. 

Trustee  May  Not  Obtain  Personal  Profit  from  the  Estate. 

One  who  occupies  a  fiduciary  relation  may  not  reap  any  personal 
gain  from  the  estate.  Baker  v.  Lane,  118  S.  W.  Rep.  963.  A  purchase 
with  trust  moneys  made  in  the  individual  name  of  the  trustee  is  void- 
able at  the  option  of  the  beneficiary.  Prewitt  v.  Morgan's  Heirs,  119 
S.  W.  Eep.  174. 

Carrying  on  Business. 

A  trustee  who  carries  on  the  business  of  the  estate  in  his  own 
name  must  account  for  interest  on  the  cash  funds  employed.  Weir  v. 
Weir,  42  Ky.  645. 

Must   Distribute  or  Invest. 

It  is  the  duty  of  the  trustee  to  make  the  fund  as  productive  as 
prudence  will  permit.  A  trustee  who  permits  the  funds  to  lie  idle 
beyond  a  reasonable  time  is  chargeable  with  interest.  Blakey's  Exr.  v. 
Blakey,  26  Ky.  674;  Jennings'  Exr's.  v.  Davis,  35  Ky.  127;  Karr's 
Admr.  v.  Karr,  36  Ky.  3;  Clemens  v.  Caldwell,  46  Ky.  171. 

But  interest  is  not  chargeable  when  funds  are  placed  in  a  bank 
pending  contest  of  a  will.  Taylor  v.  Minor,  90  Ky.  544.  Xor  until 
after  a  proper  demand  for  distribution  has  been  made.  Hall  v.  Sims, 
25  Ky.  509. 

Continuing   Investments   Made    by   Testator. 

It  seems  that  formerly  a  trustee  was  not  permitted  to  continue 
investments  made  by  the  testator  in  Bank  of  Kentucky  stock.  Smith  v. 
Smith,  30  Ky.  238.  But  even  before  the  passage  of  the  present  statutes 
the  rule  seems  to  have  been  relaxed  to  such  an  extent  that  a  trustee 
was  permitted  to  continue  investments  in  bank  stock.  The  rule  of  pru- 
dence was  thus  liberally  construed.  Fidelity  Trust  Co.  v.  Glover,  90 
Ky.  355. 

May  Not  Mingle  Trust  Funds. 

A  trustee  is  personally  liable  if  he  mingles  trust  funds  with  his 
own,  or  if  he  invests  on  merely  personal  security.  Clay  v.  Clay,  60 
Ky.  548. 

Bank    Stock. 

In  order  that  a  trustee  may  be  justified  in  the  investment  of 
trust  funds  in  bank  stock,  the  corporation  must  have  been  in  operation 
for  more  than  ten  years.  Investment  in  such  stock  is  permitted  under 
the  general  words  "or  dividend-paying  securities"  in  section  4168, 
only  when  these  general  words  are  limited  by  the  words  which  fol- 
low. Consequently,  the  bank  must  have  been  in  operation  for  more 
than  ten  years  and  must  not  have  defaulted  in  payment  of  principal 
or  interest.  The  limitations  of  the  statute  apply  to  all  corporations, 


KENTUCKY.  95 

the  word  "railroad"  being  used  merely  as  an  illustration.  Before 
a  trustee  is  permitted  to  invest  in  stock  of  a  private  business  cor- 
poration, such  corporation  must  have  fulfilled  all  the  requirements  of 
the  statute.  Eobertson  v.  Eobertson's  Trustee,  130  Ky.  293. 

Real  Estate  in  Another  State. 

The  real  estate  mentioned  in  section  4168  is  not  limited  to  real 
estate  located  in  Kentucky.  Eidley  v.  Dedman,  134  Ky.  146.  But  the 
decision  cannot  be  said  to  decide  the  question  definitely,  for  the  trust 
instrument  provided  for  sale  and  reinvestment,  and  it  was  to  the  in- 
terest of  the  beneficiary  to  have  the  investment  made  in  another  state. 
Moreover,  a  court  of  chancery  had  ordered  a  sale  for  the  purpose  of 
giving  the  trustee  an  opportunity  to  buy  a  home  in  Alabama.  Although 
the  court  said  that  there  was  no  rule  limiting  the  trustee  to  invest- 
ments in  real  property  in  Kentucky,  it  would  seem  to  be  safer  not  to 
invest  in  property  without  the  state  unless  so  ordered  by  the  court. 

Guardians. 

Sections  4168  and  4169  apply  to  guardians.  Prior  to  the  enactment 
of  these  sections  extending  the  field  of  investments  for  trustees,  guar- 
dians and  trustees  were  limited  to  real  estate  and  government  securities. 
But  when  the  trustee  exercised  good  faith,  the  courts  were  liberal  in 
their  treatment,  even  going  so  far  as  to  sanction  investments  in  cor- 
porate stock  or  mere  personal  security.  Durrett's  Guardian  v.  Com- 
monwealth, 90  Ky.  312. 

Construction  of  Sections  4168   and  4169. 

As  to  the  construction  of  sections  4168  and  4169,  of  the  Statutes, 
see:  Goff's  Guardian  v.  Goff,  123  Ky.  73;  Aydelott  v.  Breeding,  111 
Ky.  847;  Stone  v.  Clay,  103  Ky.  314;  Bank  v.  Winn,  110  Ky.  140;  Chap- 
pell  v.  Chappell,  124  Ky.  691. 


LOUISIANA. 

i 

TRUSTEES    GENERALLY. 

Civil    Code    of    1909. 
(With  Amendments  to   1914.) 

Sec.  1150. — All  Executors,  Administrators,  Curators  and 
Syndics  shall  deposit  all  moneys  collected  by  them,  as  soon 
as  the  same  shall  come  into  their  hands,  in  one  of  the  char- 
tered banks  of  this  state  or  in  one  of  their  branches,  allow- 
ing interest  on  deposits,  if  there  be  one  in  the  parish.  They 
shall  keep  a  bank  book  in  their  official  name,  and  shall  on 
no  account  withdraw  the  deposits,  or  any  part  thereof  until 
a  tableau  of  distribution  shall  be  homologated,  or  unless  or- 
dered by  a  competent  court,  and  then  only  to  pay  such  debts 
as  may  be  ordered  for  payment.  On  failure  to  comply  with 
the  provision  of  this  section,  they  shall  be  condemned  jointly 
and  severally  with  their  securities  to  pay  to  the  use  of  the 
estate  twenty  per  cent  interest  per  annum  on  the  amount  not 
deposited  or  withdrawn  without  authority,  beside  all  special 
damage  suffered,  and  shall  be  dismissed  from  the  office. 

TRUST    COMPANIES. 

Statutes    of    1904. 

Investments.  Section  8  of  Laws  Relating  to  Savings,  Safe 
Deposit  and  Trust  Banks. — All  funds  held  by  said  bank  as 
agent  or  trustee,  which  as  such  they  have  power,  authority 
or  direction  to  invest,  may,  unless  otherwise  required  by  the 
principal  or  by  the  court,  or  by  the  person  constituting  such 
trust  or  agency,  be  invested  by  them  in  bonds  of  the  United 
States,  or  of  any  of  the  states  of  the  Union,  or  of  any  of 
the  parishes,  municipal  corporations,  or  levee,  or  drainage, 
or  road  districts  of  the  State  of  Louisiana,  or  of  any  of 

96 


LOUISIANA.  97 

the  counties  or  municipal  corporations  of  any  of  the  states  of 
the  Union  (provided  that  at  the  time  of  such  investment  such 
bonds  shall  be  quoted  at  par  or  above  in  the  markets  where 
such  bonds  are  usually  sold,  and  the  interest  on  said  bonds 
shall  have  been  regularly  paid  for  at  least  two  years  prior 
to  such  investment)  or  in  the  stocks  of  incorporated  rail- 
roads, canals  or  other  quasi-public  corporations  (provided  that 
such  stocks  shall,  at  the  time  of  such  investment,  be  quoted 
at  par  or  above  in  the  markets  where  such  stocks  are  listed 
and  usually  sold,  and  have  regularly  paid  a  dividend  of  not 
less  than  four  per  cent  per  annum  for  at  least  five  years 
prior  to  such  investment)  or  in  first  mortgages  on  real  estate 
(provided  that  no  sum  shall  be  lent  on  any  mortgage  for  more 
than  fifty  per  cent  of  the  appraised  value  of  the  property,  nor 
for  a  longer  period  than  ten  years).  None  of  the  funds  or  the 
property  held  by  such  a  bank  as  agent  or  trustee  shall  be 
counted  among  the  assets  or  liabilities  of  such  bank  in  mak- 
ing the  statements  required  by  law  to  be  published  of  the 
affairs  of  such  bank. 

GUARDIANS. 

Eevised    Civil    Code    of    1909. 
(With   Amendments   to   1914.) 

Sec.  347. — The  tutor  shall  be  bound  to  invest  in  the  name 
of  the  minor,  the  revenues  which  exceed  the  expenses  of  his 
ward,  whenever  they  amount  to  five  hundred  dollars.  In  de- 
fault thereof  he  shall  be  bound  to  pay  on  such  excess  the  rate 
of  interest  allowed  by  law. 

Sec.  348. — The  investment  of  the  funds  of  the  minor  must 
be  made  by  public  act  and  secured  by  mortgage,  unless  such 
investment  be  made  in  the  bonds  of  the  State  of  Louisiana 
or  in  bonds  for  the  payment  of  which  the  faith  of  the  State 
of  Louisiana  stands  pledged,  and  this  investment  in  bonds 
shall  only  be  made  under  a  decree  of  the  court  having  juris- 
diction over  the  tutorship,  nor  shall  such  investment  be 
changed  or  the  bonds  alienated  except  by  a  decree  of  the 
same  court. 


98  STATE   LAWS   AND   DECISIONS. 

In  case  of  such  investment  in  bonds,  it  shall  be  the  duty 
of  the  tutor  to  furnish  the  Auditor  of  Public  Accounts  with 
a  copy  of  the  decree  of  the  court  authorizing  such  invest- 
ment and  to  cause  the  bonds  to  be  registered  in  the  office 
of  the  Auditor.  The  Auditor  shall  write,  in  large  and  legible 
characters,  on  the  face  of  the  bonds,  that  they  are  the  prop- 
erty of  such  minor  or  minors,  mentioning  his,  her  or  their 
names ;  that  they  were  purchased  by  virtue  of  a  decree  of  the 
court  aforesaid;  and  they  are  not  transferable,  unless  by 
virtue  of  a  decree  of  such  court  authorizing  the  same,  and 
he  shall  sign  the  statement.  Such  bonds  shall  thereby  lose 
their  negotiable  character,  and  no  person  obtaining  possession 
thereof,  other  than  the  minor  or  minors  to  whom  they  belong, 
shall  have  any  rights  therein  or  thereto.  The  Auditor  shall 
keep  a  distinct  book  wherein  to  register  such  bonds. 

Speculation. 

A  trustee  may  not  speculate  with  the  funds  of  the  estate.  Darse  v. 
Leaumont,  5  Eobinson  287. 

Must  Not  Invest  in  Individual  Name. 

A  trustee  may  not  purchase  or  take  security  for  an  investment 
in  his  individual  name.  Lowe  v.  Armant,  9  Eobinson  236;  Hall  v. 
Woods,  4  La.  Annual  85. 

Deposit  in  Bank. 

By  an  act  in  force  since  1837,  executors  and  administrators  are 
required  to  deposit  moneys  belonging  to  the  estate  "in  one  of  the 
chartered  banks  of  this  state,  or  in  one  of  their  branches,  allowing 
interest  on  deposits,  if  there  be  one  in  the  parish,"  under  a  penalty 
of  twenty  per  cent  per  annum  interest  on  the  amount  not  so  deposited, 
or  withdrawn  without  order,  and  dismissal  from  office.  But  this  statute 
does  not  require  money  received  by.  executors  to  be  deposited,  unless 
there  be  a  bank  which,  by  its  charter,  pays  interest  on  deposits.  The 
object  of  the  law  is  to  render  the  funds  productive.  Due  diligence 
will  relieve  the  trustee  from  the  penalty.  Succession  of  Peytavin,  7 
Eobinson  477. 

When  trustees  exercise  reasonable  care  in  selecting  a  solvent  bank 
and  depositing  the  funds,  the  protection  of  the  law  will  be  extended 
to  them.  Cooper  v.  Pellerin,  9  Eobinson  450. 

Duty   to   Invest. 

The  excess  of  revenues  over  the  expenses  of  a  minor  are  a  part 
of  the  capital,  and  if  the  tutor  fails  to  invest  the  excess  over  $500, 


LOUISIANA.  99 

as   directed   by  law,  he    is   chargeable   with   interest.     Glenn   v.    Elam, 
3  La.  Annual  611;  Fuselier  v.  Babineau,  14  La.  Annual  764. 

Persons  holding  money  in  a  fiduciary  capacity  are  not  permitted 
to  leave  it  with  commission  merchants  merely  because  it  is  convenient 
and  because  they  choose  to  deal  with  their  own  in  that  way.  Suc- 
cession of  Stone,  31  La.  Annual  311. 

May  Not  Continue  Business. 

Although  an  executor  may  cultivate  a  crop  to  fruition,  he  may 
not,  without  authority,  carry  on  a  plantation  and  contract  with  refer- 
ence thereto.  Florsheim  Bros.  v.  Holt,  32  La.  Annual  133. 

Investments  Made  on  Credit. 

Investments  should  be  made  out  of  surplus  of  a  ward's  estate. 
The  heirs  are  not  bound  when  investments  are  made  on  credit.  This 
amounts  to  dangerous  speculation.  Kandlett  v.  Gordy,  32  La.  An- 
nual 904. 

Family  Meeting   and   Advice   of   Court. 

The  old  custom  of  a  family  meeting  for  consultation  and  advice 
to  trustees  is  still  retained  in  Louisiana.  A  tutor  owes  his  wards  in 
all  cases  the  funds  which  he  receives,  together  with  legal  interest, 
and  he  can  shield  himself  from  responsibility  only  by  investing  funds 
in  their  name,  under  a  judgment  of  court  rendered  on  the  advice  of 
a  family  meeting.  Monget  v.  Walker,'  4  La.  Annual  214. 

But  a  trustee  is  not  compelled  to  consult  the  family  meeting  to 
invest.  Mather  v.  Knox,  34  La.  Annual  412. 


MAINE. 

TRUST    COMPANIES. 

Laws    of    1907. 
(With   Amendments   to   1914.) 

Board  of  Investment.  Section  12. — The  board  of  directors 
or  the  executive  board  of  such  company  shall  constitute  the 
board  of  investment  of  the  company.  Said  directors  or  ex- 
ecutive board  shall  keep  in  a  separate  book,  specially  pro- 
vided for  the  purpose,  a  record  of  all  loans  and  investments 
of  every  description  made  by  said  company,  substantially  in 
the  order  of  time  when  such  loans  or  investments  are  made, 
which  shall  show  that  such  loans  or  investments  have  been 
made  with  the  approval  of  the  Investment  Board  of  said  com- 
pany, and  which  shall  indicate  such  particulars  respecting 
such  loans  or  investments  as  the  Bank  Examiner  shall  direct. 
This  book  shall  be  submitted  to  the  directors  and  stock- 
holders, and  to  the  Bank  Examiner  whenever  requested.  Such 
loans  or  investments  shall  be  classified  in  the  book  as  the 
Bank  Examiner  shall  direct. 

Trust  Funds.  Section  14. — All  the  property  or  money  held 
in  trust  by  any  such  company  shall  constitute  a  special  de- 
posit, and  the  accounts  thereof  of  said  trust  department  shall 
be  kept  separate,  and  such  funds  and  the  investment  or  loans 
of  them  shall  be  specially  appropriated  to  the  security  and 
payment  of  such  deposits,  and  not  be  subject  to  any  other 
liabilities  of  the  company,  and  for  the  purpose  of  securing 
the  observance  of  this  proviso,  such  company  shall  have  a 
trust  department  in  which  all  business  pertaining  to  such 
trust  property  shall  be  kept  separate  and  distinct  from  its 
general  business. 

100 


MAINE.  101 

TRUSTEES    GENERALLY. 

Statutes    of    1904. 
(With   Amendments   to   1914.) 

Sec.  9.  Chapter  70. — Any  judge  of  probate,  having  juris- 
diction of  the  trust,  and  the  Supreme  Judicial  Court  in  any 
county,  on  application  of  the  trustee,  or  of  any  person  in- 
terested in  the  trust  estate,  after  notice  of  all  interest,  may 
authorize  or  require  him  to  sell  any  real  or  personal  estate 
held  by  him  in  trust,  and  to  invest  the  proceeds  thereof,  with 
any  other  trust  moneys  in  his  hands,  in  real  estate,  or  in  any 
other  manner  most  for  the  interest  of  all  concerned  therein; 
and  may  give  such  further  directions  as  the  case  requires,  for 
managing,  investing  and  disposing  of  the  trust  fund,  as  will 
best  effect  the  objects  of  the  trust. 

Guardians.  Sec.  20. — A  guardian  may  sell  the  property  of 
the  ward  and  invest  the  proceeds  of  such  sale,  or  any  other 
moneys  in  his  hands,  in  real  estate  or  in  any  other  manner  as 
ordered  by  the  court. 

Must  Follow  Provision  of  Trust  Instrument. 

In  making  investments  the  trustee  must  follow  strictly  the  pro- 
vision of  the  trust  instrument  and  if  the  written  consent  of  the  cestui 
que  trust  is  necessary,  a  failure  to  secure  it  renders  the  trustee  liable. 
Crocker  v.  Pierce,  61  Me.  58. 

When  Trustee  May  Sell. 

When  a  specific  bequest  of  the  income  of  certain  stocks  is  needed, 
the  trustee  has  no  power  to  sell  such  stock,  but  in  case  the  stock  is 
likely  to  depreciate  in  value  to  the  injury  of  the  income,  the  court, 
under  its  power  to  determine  the  expediency  of  making  changes  of 
investments,  may  order  the  trustee  to  sell  and  reinvest.  Eichardson 
v.  Knight,  69  Me.  285. 

Power  to  Sell  Does  Not  Give  Power  to  Purchase  on  Credit. 

A  trustee  who  is  given  power  to  sell  parts  of  the  estate  and 
invest  the  proceeds  does  not  have  power  to  purchase  lands  on  credit. 
Bowman  v.  Pinkham,  71  Me.  295. 

When  Repairs  May  Be  Considered  an  Investment. 

A  trust  deed  gave  the  trustees  power  "To  keep  and  maintain 
the  principal  of  said  trust  estates  safely  invested  according  to  their 


102  STATE   LAWS   AND   DECISIONS. 

best  judgment."  The  estate  owned  mortgages  on  mill  property  and 
it  was  necessary  for  the  trustees  to  take  the  property  in  payment 
of  the  debt.  It  was  not  a  good  investment  and  the  trustees  made 
necessary  repairs  and  sold  the  property.  The  court  decided  that  when 
real  estate  is  purchased  as  an  investment,  or  however  obtained,  if  the 
trustees  decide  to  keep  it  as  such,  they  may  make  such  repairs  as 
they  deem  necessary  to  put  it  in  good  condition  at  the  expense  of  the 
capital.  After  that  they  must  keep  it  in  repairs  at  the  expense  of 
income.  Eepairs  made  at  the  expense  of  capital  are  to  that  extent  an 
investment  of  the  trust  fund,  and  are  therefore  justifiable  only  when 
the  realty  itself  is  a  proper  investment  for  the  fund.  Veazie  v.  For- 
saith,  76  Me.  172. 

Kate  of  Interest. 

A  trustee  who  had  invested  in  United  States  bonds  yielding  less 
than  three  per  cent  was  accused  of  an  injudicious  investment  because 
some  other  more  profitable  investment  should  have  been  obtained.  But 
investments  carefully  and  judiciously  made  cannot  be  attacked  because 
the  yield  is  not  high.  Emery  v.  Batchelder,  T8  Me.  233. 

Measure  of  Trustee's  Duty. 

In  measuring  the  duty  of  a  trustee  with  the  usual  conduct  of  the 
man  of  average  prudence  in  the  case  of  his  own  estate,  reference  is 
to  be  had  to  the  conduct  of  such  a  man  in  making  permanent  invest- 
ments of  his  savings  outside  of  ordinary  business  risks,  rather  than 
to  his  conduct  in  business  chances.  A  mere  business  chance  "or  pros- 
pect, however  promising,  is  not  a  proper  place  for  trust  funds. 

Second  Mortgages. 

Second  mortgages  are  unsuitable,  for  they  subject  the  estate  to 
the  possibility  of  raising  funds  to  pay  off  the  first  mortgage.  Mattocks 
v.  Moulton,  84  Me.  545. 

Stocks   and   Bonds. 

Stocks  and  bonds  of  a  new  corporation,  where  the  success  of  the 
business  is  not  established,  are  not  suitable  for  investments  of  trust 
funds.  Mattocks  v.  Moulton,  84  Me.  545. 

Personal   Security.     . 

Trustees  may  not  invest  funds  upon  mere  personal  security.  Mat- 
tocks v.  Moulton,  84  Me.  545. 

Power  to   Sell. 

The  Maine  courts  have  gone  far  in  giving  a  trustee  power  to  sell, 
and  have  indicated  that  the  words  "invest  and  manage"  properly 
impart  and  imply  a  power  of  sale  unless  a  contrary  intention  on  the 


MAINE.  103 

part  of  the  testator  can  be  found  in  the  will  taken  as  a  whole.    Robin- 
son v.  Eobinson,   105   Me.  68. 

May  Not  Invest  for  Personal  Benefit. 

A  trustee  by  investing  trust  funds  in  his  own  business,  or  for  his 
own  benefit  or  accommodation  becomes  an  insurer  of  the  fund  and  of 
its  productiveness.  It  is  only  in  making  investments  entirely  outside 
of,  and  apart  from,  his  own  property  or  interest,  that  a  trustee  can 
have  the  approval  of  the  court.  Bangor  v.  Beal,  85  Me.  129. 


MARYLAND. 

Code  of  1911. 
(With   Amendments   to   1914.) 

Sec.  167.  The  Orphans'  Court,  if  they  shall  think  such 
sale  advantageous  to  the  ward,  may  order  any  guardian  to 
sell  leasehold  estates  of  his  ward,  and  shall  order  the  pro- 
ceeds to  be  invested  in  bank  stock  or  any  other  good  security, 
in  the  name  of  the  ward;  and  no  sale,  transfer  or  disposal 
of  the  said  stock  shall  be  made  without  the  order  of  the 
court.  The  said  court  may  also,  if  they  shall  think  the  same 
advantageous  to  the  ward,  order  any  guardian  to  lease  any 
leasehold  estates  of  the  ward,  for  the  whole  or  any  part  of 
the  unexpired  term,  on  such  terms  as  may  be  deemed  advan- 
tageous; provided,  that  such  agreement  for  a  lease  shall  not 
have  any  effect  until  reported  to  and  approved  by  the  court, 
and  the  rents  arising  on  such  lease  shall  be  accounted  for 
as  other  property  or  income  of  the  ward. 

Sec.  168.  The  Orphans'  Court  may  order  any  money  be- 
longing to  a  ward  to  be  invested  in  like  manner  and  sub- 
ject to  the  same  restrictions  as  prescribed  in  the  preceding 
section. 

Sec.  172.  Order  of  Orphans'  Court. — They  shall  order  the 
guardian  who  has  received  from  any  trustee  of  a  court  of 
equity  any  proceeds  of  real  estate  of  his  ward  sold  by  such 
trustee,  or  the  proceeds  of  the  sale  of  leasehold  estate  of  his 
ward,  sold  by  order  of  the  Orphans'  Court,  or  moneys  belong- 
ing to  his  ward,  to  invest  the  same  in  mortgages  on  unincum- 
bered  real  estate,  worth  at  least  double  the  amount  loaned,  or 
such  public  stock,  permanent  funds,  or  other  good  securities 
to  be  selected  by  said  guardian,  as  will  yield  the  highest  rate 
of  interest  that  can  reasonably  be  had,  or  they  may  when  it  is 
clearly  for  the  benefit  of  the  ward,  order  the  same  to  be  in- 

104 


MARYLAND.  105 

vested  in  land ;  and  the  investment  selected  shall  be  reported  to 
the  Court  for  its  approval  before  becoming  permanent,  and  the 
increase  or  surplus  income  of  such  investment,  after  what  may 
be  necessary  for  the  maintenance  and  education  of  the  ward, 
shall  be  invested  in  like  manner  under  the  direction  and  ap- 
proval of  the  Court,  and  no  part  of  the  principal  shall  be 
applied  to  the  maintenance  and  education  of  the  ward  without 
the  order  and  consent  of  the  Orphans'  Court  first  had  and  ob- 
tained. 

Sec.  173.  Must  Invest  in  Name  of  Ward. — All  moneys  in- 
vested under  the  preceding  section  shall  be  invested  in  the 
name  of  the  ward,  and  shall  be  transferable  only  under  the 
order  of  the  Orphans'  Court;  and  all  transfers  without  such 
order  shall  be  void;  and  whenever  the  Orphans'  Court  shall 
in  its  discretion  authorize  a  guardian  to  invest  or  mortgage  the 
proceeds  of  the  sale  of  real  estate  belonging  to  his  ward  and 
sold  by  a  trustee  in  equity,  the  affidavit  of  consideration  to 
such  mortgage  shall  be  made  by  the  guardian  of  such  ward. 

Sec.  242.  Administrators  and  Guardians. — The  Orphans' 
Court  may,  in  their  discretion,  and  whenever  it  shall  seem 
proper  to  them,  either  ex-officio,  or  upon  application,  order  any 
administrator  to  whom  they  may  have  granted  administration, 
or  any  guardian  whom  they  may  have  appointed,  or  whose 
bond  they  may  have  approved,  to  bring  into  Court,  or  place 
in  bank,  or  invest  in  bank  or  other  incorporated  stock,  or  any 
other  good  security,  any  money  or  funds  received  by  such  ad- 
ministrator or  guardian ;  and  the  Court  shall  direct  the  manner 
and  form  in  which  such  money  or  funds  shall  be  placed  in  bank 
or  invested,  and  the  same  shall  at  all  times  be  subject  to  the 
order  and  control  of  the  Court;  and  if  the  administrator  or 
guardian  shall  not,  within  a  reasonable  time  to  be  fixed  by  the 
Court,  comply  with  the  order,  his  administration  or  guardian- 
ship may  be  revoked. 

Rule  Adopted  by  the  Courts  of  Baltimore. 

The  rule  in  Maryland  is  that  any  investment  by  a  trustee 
must  be  approved  by  the  court  having  jurisdiction  of  the 
trust.  For  the  purpose  of  facilitating  the  work  of  trustees 


106  STATE  LAWS  AND  DECISIONS. 

the  courts  of  Baltimore  have  adopted  rules  governing  invest- 
ments, and  if  the  trustee  invests  in  the  manner  prescribed 
by  the  court,  the  investment  will  be  approved.  The  courts 
of  Baltimore  have  thus  provided  rules  which  in  many  other 
states  have  been  made  statutory.  Because  of  the  importance 
of  these  rules,  and  because  they  are  undoubtedly  a  guide  for 
trustees  in  the  whole  state,  they  are  stated  in  full.  In  addi- 
tion to  the  rules  and  the  specific  securities  mentioned,  the 
court  also  prepares  a  list  of  securities  which  comply  with  the 
rules  and  this  list  is  revised  each  year. 

Sec.  1.  Investments  of  Trust  Funds,  unless  it  is  otherwise 
provided  in  the  instrument  creating  the  trust,  or  except  un- 
der extraordinary  conditions  set  forth  fully  to  the  court,  will 
be  sanctioned  by  the  Circuit  Court  of  Baltimore  City  and  the 
Circuit  Court  Number  Two  of  Baltimore  City  only  when  made 
in  the  securities  mentioned  in  the  Third  Section  of  this  Rule. 

Sec.  2.  The  list  of  authorized  securities  mentioned  in  the 
foregoing,  and  set  out  in  the  succeeding  section  shall  be  an- 
nually revised  by  the  Supreme  Bench,  and  a  Committee  of 
Judges  shall  be  appointed  for  that  purpose  at  the  general  term 
held  at  the  close  of  the  September  Term  of  the  Common  Law 
Courts,  which  Committee  shall  have  power  to  appoint  for  its 
assistants  such  expert  advisers  as  it  may  find  expedient  and 
practicable. 

The  application  to  place  upon  the  list  of  authorized  invest- 
ments any  investment  which  does  not  fully  meet  the  require- 
ments set  forth  in  this  Rule  will  not  be  considered  at  any 
other  time  save  at  the  time  of  the  annual  revision  of  the 
list,  except  under  special  circumstances,  and  with  suitable 
provision  for  procuring  impartial  expert  testimony  at  the  ex- 
pense of  the  party  making  such  application. 

Sec.  3.  The  following  investments  for  Trust  Funds  will 
ordinarily  be  sanctioned  by  the  said  Courts  upon  petition,  and 
subject  to  the  limitations  in  this  section,  hereinafter  set  forth, 
until  the  further  order  of  court,  made  in  pursuance  of  the 
preceding  section. 

(A)     United  States  Bonds.— All  Bonds  for  which  the  faith 


MARYLAND.  107 

of  the  United  States  is  pledged  to  provide  for  the  payment 
of  the  interest  and  principal. 

(B)  State  and  Territory  Bonds. — All  authorized  Bonds  of 
any  State  or  Territory  of  the  United  States  and  of  the  Dis- 
trict of  Columbia. 

(C)  County  Bonds. — (1)  All  duly   authorized  Bonds   of 
any  County  in  this  State. 

(2)  All  duly  authorized  Bonds  of  any  County  of  any 
other  State  of  the  United  States  having  a  population  of  not 
less  than  40,000  persons,  according  to  the  last  Federal  Census, 

Provided  such  County  has  not  defaulted  in  the  payment 
of  any  part  of  the  principal  and  interest  of  any  of  its  indebt- 
edness within  ten  years  prior  to  the  making  of  the  invest- 
ment; 

Provided  also,  that  the  net  indebtedness  of  the  said  County 
does  not  exceed  five  per  cent,  of  the  last  preceding  valuation 
of  property  for  taxation; 

Provided  also,  that  there  is  no  obstacle  by  Constitutional 
or  Legislative  limitation,  or  otherwise,  4o  the  enforcement 
of  the  payment  of  the  principal  and  interest  of  said  Bonds 
by  usual  legal  process.  • 

(D)  City,  Town  and  Other  Municipal  Bonds. — (1)  Any 
duly  authorized  Bond  issued  by  any  municipality  within  the 
State  of  Maryland. 

(2)  Any  duly  authorized  Bond  of  any  City  in  any  other 
State  of  the  United  States  of  25,000  or  more  inhabitants,  ac- 
cording to  the  last  Federal  Census, 

Provided  (in  either  case)  that  such  bond  is  a  direct  obli- 
gation upon  said  Municipality  or  City,  and  that  there  is  no 
obstacle  by  Constitutional  or  Legislative  limitation,  or  other- 
wise, to  the  enforcement  of  the  payment  of  the  principal  and 
interest  of  the  said  bonds  by  usual  legal  process. 

Special  Assessment  Bonds  and  Improvement  Bonds  which 
are  not  direct  and  primary  obligations  of  the  City  issuing  the 
same  are  not  allowed. 

Provided  also  (in  either  case)  that  such  Municipality  or 
City  has  not  defaulted  upon  any  of  its  funded  obligations  for 
the  next  preceding  ten  years. 


108  STATE   LAWS   AND   DECISIONS. 

Provided  also,  that  the  net  indebtedness  of  such  Munici- 
pality within  the  State  of  Maryland,  if  of  less  than  25,000  in- 
habitants, according  to  the  last  Federal  Census,  does  not  ex- 
ceed five  per  centum  of  its  last  preceding  valuation  of  prop- 
erty for  taxes;  and  that  the  net  indebtedness  of  any  such 
Municipality  or  City  situate  in  Maryland  or  elsewhere  of 
more  than  25,000  inhabitants,  and  less  than  100,000  in- 
habitants, together  with  the  indebtedness  of  any  District,  or 
other  Municipal  corporation,  or  subdivision,  except  a  County 
which  is  wholly  or  in  part  within  the  limits  of  said  City,  does 
not  exceed  seven  per  cent,  of  such  valuation ;  and  that  the  net 
indebtedness  of  any  such  Municipality  or  City  situate  in 
Maryland  or  elsewhere,  if  of  more  than  100,000  inhabitants, 
according  to  the  last  Federal  Census,  together  with  the  indebt- 
edness of  any  District,  or  other  Municipal  corporation,  or  sub- 
division, except  a  county  which  is  wholly  or  in  part  included 
within  the  limits  of  said  City,  does  not  exceed  ten  per  centum 
of  such  valuation.  Such  net  debt  of  any  City  or  Municipality 
is  to  be  determined  by  deducting  from  the  gross  debt  the 
amount  of  its  water  debt  and  negotiable  securities  in  its  Sink- 
ing Funds,,  which  are  available  for  the  payment  of  its  Bonds. 

(E)  Railroad  Bonds. — (1)  The  mortgage  bonds  of  any 
railroad  corporation  incorporated  under  the  laws  of  the 
United  States,  or  any  of  them,  which  either  actually  owns 
not  less  than  500  miles  of  standard  gauge  railroad,  exclusive 
of  sidings,  in  the  United  States,  or  the  gross  earnings  of  which 
in  each  year  during  the  five  years  preceding  the  date  of  any 
such  investment  from  the  operation  of  said  corporation,  in- 
cluding the  gross  earnings  of  all  lines  leased  and  operated,  or 
controlled  and  operated  by  it,  shall  not  have  been  less  than 
Ten  Millions  of  Dollars. 

Provided,  that  at  no  time  within  five  years  next  preceding 
the  date  of  any  such  investment  shall  such  railroad  corpora- 
tion have  failed  regularly  and  punctually  to  pay  the  ma- 
tured principal  and  interest  of  all  its  mortgage  and  other 
fixed  interest  indebtedness,  and  in  addition  thereto  regularly 
and  punctually  to  have  paid  in  cash  out  of  income  in  divi- 
dends to  its  stockholders  during  each  of  said  five  years  an 


MARYLAND.  109 

amount  at  least  equal  to  four  per  cent,  on  all  its  outstanding 
capital  stock;  and  further 

Provided,  that  all  bonds  authorized  for  investment  by  this 
clause  shall  be  secured  by  a  mortgage  which  is,  at  the  time 
of  making  said  investment,  or  was  at  the  date  of  the  execution 
of  said  mortgage,  (1)  a  first  mortgage  upon  not  less  than 
seventy-five  per  cent,  of  the  railway  actually  owned  by  the 
company  issuing  said  bonds,  exclusive  of  sidings  at  the  date 
of  said  mortgage,  or  (2)  a  general  or  consolidated  mortgage 
issued  to  retire  all  prior  lien  mortgage  debts  of  said  company 
outstanding  at  the  time  of  said  investment,  and  covering  at 
least  seventy-five  per  cent,  of  the  railway  owned  by  said 
company  at  the  date  of  said  mortgage;  but  no  one  of  the 
bonds  so  secured  shall  be  a  legal  investment  in  case  the  mort- 
gage securing  the  same  shall  authorize  a  total  issue  of  bonds, 
which,  together  with  all  outstanding  prior  debts  of  said  com- 
pany, after  deducting  therefrom,  in  case  of  a  refunding  mort- 
gage, the  bonds  reserved  under  the  provisions  of  said  mort* 
gage  to  retire  prior  debts  at  maturity,  shall  exceed  three  times 
the  outstanding  capital  stock  of  said  company  at  the  time 
of  making  said  investment;  and  no  mortgage  is  to  be  re- 
garded as  a  Refunding  Mortgage  under  the  provisions  of  this 
rule  unless  the  bonds  which  it  secures  mature  at  a  later 
date  than  any  bond  which  it  is  given  to  refund,  nor  unless 
it  covers  a  mileage  at  least  twenty-five  per  cent,  greater  than 
is  covered  by  any  one  of  the  prior  mortgages  so  to  be  re- 
funded. 

(2)  Any  Underlying  Bonds  to  secure  the  retirement  of 
which  Refunding  Bonds  have  been  authorized  under  a  mort- 
gage fully  complying  with  the  provisions  of  the  First  Sub- 
section hereof. 

(3)  Any  "Underlying"  First  Mortgage  Bonds  covering 
the  whole  of  any  railroad  which  has  been  consolidated  with 
and  made  part  of  the  main  line  of  another  railroad  actually 
owning  and  operating  not  less  than  Five  Hundred  miles  of 
standard  gauge  railroad,  provided  said  last  mentioned  rail- 
road has  issued  and  outstanding  mortgage  bonds,   covering 
its  whole  trackage,  including  the  road  so  consolidated  with, 


110  .  STATE  LAWS  AND  DECISIONS. 

to  such  an  amount  that,  dividing  its  whole  mortgage  indebt- 
edness by  the  whole  number  of  miles  of  road,  the  quotient  will 
be  at  least  double  the  amount  per  mile  of  said  First  Mortgage 
Bonds  which  remain  as  an  underlying  lien  prior  to  the  mort- 
gage bonds  so  issued  on  the  consolidated  road,  » 

Provided  neither  of  said  railroads  has  failed  to  pay  either 
the  interest  or  principal  of  any  of  its  mortgage  or  fixed  in- 
terest indebtedness  for  ten  years  next  preceding  such  invest- 
ment. 

(4)  The  following  Steam  Railroad  securities  specifically 
named : 

Alabama  Central  R.  R.  Co.  First  Mortgage  6%  Bonds,  due 
1918. 

Alabama  Midland  Rwy.  Co.  First  Mortgage  GJb  Gold  Bonds, 
due  Nov.  1,  1928.  (Reduced  to  5%.) 

Atchison,  Topeka  &  Santa  Fe  Rwy.  Co.  Gen'l  Mortgage  ±% 
Gold  Bonds,  due  Oct.  1,  1995. 

Atlantic  Coast  Line  Railroad  Company  First  Consolidated 
Mortgage  4%  Gold  Bonds,  due  July  1,  1952 ;  and  all  securities 
underlying  said  mortgage. 

Atlantic  Coast  Line  R.  R.  Co.  of  South  Carolina,  General 
First  Mortgage  4%  Bonds,  due  July  1,  1948. 

Baltimore  &  Ohio  R.  R.  Co.  4y2%  Equipment  Trust  Certifi- 
cates, due  annually  from  April  1st,  1914,  to  April  1st,  1923. 

Baltimore  &  Ohio  R.  R.  Co.,  Prior  Lien,  3y2%  Gold  Bonds, 
due  July  1,  1925. 

Baltimore  &  Ohio  R.  R.  Co.,  1st  Mortgage  4%  Gold  Bonds,, 
due  July  1,  1948. 

Baltimore  &  Ohio  R.  R.  Co.,  1st  Mortgage  Southwestern 
Division  3y2%  Gold  Bonds,  due  July  1,  1925. 

Baltimore  &  Ohio  R.  R.  Co. — Pittsburgh,  Lake  Erie  and 
West  Virginia  System,  Refunding  Mortgage  4%  Gold  Bonds, 
due  Nov.  1,  1941 ;  and  all  securities  underlying  this  mortgage. 

Baltimore,  Catonsville  &  Elliott's  Mills  Passenger  R.  R.  Co. 
1st  Mortgage  5%  Bonds,  due  July  1,  1916. 

Baltimore,  Sparrows  Point  &  Chesapeake  R.  R.  First  Mort- 
gage 41/2%  Bonds. 

Baltimore  Traction  Co.  1st  Mortgage  5%  Bonds,  due  Nov. 


MARYLAND.  Ill 

1,  1929,  and  North  Baltimore  Division  5%  Gold  Bonds,  due 
June  1,  1942. 

Brunswick  &  Western  R.  R.  Co.  1st  Mortgage  4%  Bonds, 
due  Jan.  1,  1938. 

Burlington,  Cedar  Rapids  and  Northern  Rwy.  Co.  Consoli- 
dated 1st  Mortgage  5%  Gold  Bonds,  due  April  1,  1934. 

Carolina  Central  Railroad  First  Consolidated  Mortgage  4% 
Gold  Bonds,  due  Jan.  1,  1949. 

Central  Pacific  Railway  First  Refunding  Mortgage  4%  Gold 
Bonds,  due  Aug.  1,  1949. 

Central  Railroad  of  New  Jersey  General  Mortgage  5%  Gold 
Bonds,  due  July  1,  1987. 

Central  Railway  Company  Cons.  1st  Mortgage  5%  Gold 
Bonds,  due  May  1,  1932. 

Chesapeake  &  Ohio  Rwy.  Co. — Richmond  &  Alleghany 
Div. — 1st  Cons.  Mortgage  4%  Gold  Bonds,  due  Jan.  1,  1989. 

Chicago  &  Alton  R.  R.  Refunding  Mortgage  3%  Bonds, 
due  Oct.  1,  1949. 

Chicago,  Burlington  &  Quincy  R.  R.  Co.  General  Mortgage. 
1%  Bonds,  due  1958. 

Chicago  &  Northwestern  R.  R.  Co.  General  Mortgage  3~y2% 
Bonds,  due  1987. 

Cleveland,  Loraine  &  Wheeling  Rwy.  Co.  Consolidated 
Mortgage  5%  Bonds,  due  Oct.  1,  1933;  Refunding  Mortgage 
4:1/2%  Bonds,  due  Jan.  1,  1930;  General  Mortgage  5%  Bonds, 
due  June  1,  1936. 

Cleveland  Terminal  &  Valley  R.  R,  Co.  First  Mortgage  4% 
Bonds,  due  Nov.  1,  1995. 

Colorado  &  Southern  Rwy.  1st  Mortgage  4%  Gold  Bonds, 
due  Feb.  1,  1929. 

Columbia  &  Greenville  R.  R.  Co.  First  Mortgage  6%  Bonds, 
due  Jan.  1,  1916. 

Durham  &  Northern  Railroad  First  Mortgage  6%  Bonds, 
due  Nov.  1,  1928. 

East  Tennessee,  Virginia  &  Georgia  Rwy.  Co.  Consolidated 
Mortgage  5%  Gold  Bonds,  due  Nov.  1,  1956,  and  First  Con- 
solidated Mortgage  5%  Gold  Bonds,  due  July  1,  1930. 


112  STATE   LAWS   AND   DECISIONS. 

Florida  Central  &  Peninsular  Railroad  First  Mortgage  5% 
Gold  Bonds,  due  July  1,  1918. 

Florida  Central  &  Peninsular  Railroad  First  Mortgage  Ex- 
tension and  Land  Grant  5%  Gold  Bonds,  due  Jan.  1,  1930. 

Florida  Central  &  Peninsular  Railroad  First  Consolidated 
Mortgage  5%  Gold  Bonds,  due  Jan.  1,  1943. 

Georgia,  Carolina  &  Northern  Railroad  First  Mortgage  5% 
Gold  Bonds,  due  July  1,  1929. 

Georgia  and  Alabama  Rwy.  Co.  Consolidated  Mortgage  5% 
Bonds,  due  Oct.  1,  1945. 

Georgia,  Southern  and  Florida  Rwy.  Co.  First  Mortgage 
5%   Gold  Bonds,  due  July  1,  1945. 

Hocking  Valley  Rwy.  First  Consolidated  Mortgage  ^/2% 
Gold  Bonds,  due  July  1,  1999. 

Huntington  &  Big  Sandy  R.  R.  Co.  First  Mortgage  6% 
Gold  Bonds,  due  July  1,  1922. 

Kansas  City,  Fort  Scott  &  Memphis  R.  R.  Co.  Consolidated 
Mortgage  6%  Bonds,  due  May  1,  1928. 

Kentucky    Central    Rwy.    Co.   First   Mortgage  4%    Gold 
Bonds,  due  July  1,  1987. 

Knoxville  &  Ohio  R.  R.  Co.  First  Mortgage  6%  Bonds,  due 
1925. 

Lake  Erie   and  Western  R.   R.   Co.   First   Mortgage   5% 
Bonds,  due  Jan.  1,  1937. 

Lake  Roland  Elevated  Rwy.  Co.  First  Consolidated  Mort- 
gage 5%  Gold  Bonds,  due  Sept.  1,  1942. 

Lehigh  Valley  R.  R.  Co.  General  Consolidated  Mortgage 
4%  and  4y2%  Bonds,  due  2003. 

Lehigh  Valley  of  N.  Y.  First  Mortgage  Gold  Guaranteed 
41/2%  Bonds,  due  July  1,  1940. 

Louisville  &  Nashville  R.  R.  Co.  Atl.  Knoxville  &  Cin.  Div. 
4%  Bonds,  due  1955. 

Louisville  &  Nashville  R.  R.  Co.  Unified  '50-year  4%  Gold 
Bonds,  due  July  1,  1940. 

Missouri,  Kansas  and  Texas  Rwy.  Co.  First  Mortgage  4% 
Bonds,  due  June  1,  1990. 

Minneapolis,  St.  Paul  and  Sault  Ste.  Marie  First  Consoli- 
dated Mortgage  4%  Bonds,  due  July  1,  1938. 


MARYLAND.  113 

Monongahela  River  R.  R.  Co.  First  Mortgage  5%  Gold 
Bonds,  due  Feb.  1,  1919. 

Nashville,  Chattanooga  and  St.  Louis  Rwy.  First  Consoli- 
dated Mortgage  5%  Gold  Bonds,  due  April  1,  1928. 

New  York,  Chicago  and  St.  Louis  R.  R.  First  Mortgage 
4%  Gold  Bonds,  due  Oct.  1,  1937. 

New  York,  Ontario  and  Western  Rwy.  Refunding  Mort- 
gage 4%  Gold  Bonds,  due  June  1,  1992. 

North  Eastern  R.  R.  Co.  Consolidated  Mortgage  6%  Bonds, 
due  Jan.  1,  1933. 

Northern  Central  Rwy.  Co.  All  issues  secured  by  mort- 
gage. 

Northern  California  Rwy.  First  Mortgage  5%  Bonds,  due 
June  1,  1929. 

Northern  Pacific  Rwy.  Co.  Prior  Lien  4%  Gold  Bonds,  due 
Jan.  1,  1997. 

Northern  Railway  First  Mortgage  5%  Gold  Bonds,  due 
Oct.  1,  1938. 

Norfolk  and  Carolina  R.  R.  First  Mortgage  5%  Gold 
Bonds,  due  April  1,  1939. 

Norfolk  and  Carolina  R.  R.  Second  Mortgage  5%  Gold 
Bonds,  due  Jan.  1,  1946. 

Norfolk  and  "Western  Rwy.  Co.  First  Consolidated  Mort- 
gage 4%  Gold  Bonds,  due  Oct.  1,  1996;  and  securities  un- 
derlying the  same. 

Ohio  &  Little  Kanawha  R.  R.  Co.  First  Mortgage  5%  Bonds, 
due  March  1,  1950. 

Ohio  River  R.  R.  Co.  First  Mortgage  5%  Bonds,  due  June 
1,  1936,  and  General  Mortgage  5%  Bonds,  due  April  1,  1937. 

Oregon  Short  Line  Ry.  First  Mortgage  6%  Bonds,  due 
Feb.  1,  1922. 

Oregon  R.  R.  and  Navigation  Co.  Consolidated  Mortgage 
4%  Gold  Bonds,  due  June  1,  1946. 

Pittsburgh,  Cincinnati,  Chicago  &  St.  Louis  Ry.  Consoli- 
dated Mortgage  4y2%  Bonds,  due  Oct.  1,  1940;  4^/2%  Bonds, 
due  April  1,  1942;  4y2%  Bonds,  due  Nov.  1,  1942;  4%  Bonds 
due  Nov.  1,  1945;  $y2%  Bonds,  due  Aug.  1,  1949;  4%  Bonds, 
due  Dec.  1,  1953;  ±%  Bonds,  due  Nov.  1,  1957. 


114  STATE   LAWS   AND   DECISIONS. 

Pittsburgh,  Cleveland  &  Toledo  R.  R.  Co.  First  Mortgage 
Q%  Bonds,  due  Oct.  1,  1922. 

Pittsburgh,  New  Castle  &  Lake  Erie  R.  R.  Co.  First  Mort- 
gage 4%  Bonds,  due  July  1,  1917. 

Pennsylvania  R.  R.  Co.  All  mortgage  bonds  of  lines  di- 
rectly operated  by  it,  when  the  bonds  are  guaranteed  by  it. 

Raleigh  &  Augusta  Air  Line  Railroad  First  Mortgage  6% 
Bonds,  due  Jan.  1,  1926. 

Raleigh  &  Gaston  Railroad  First  Mortgage  '5%  Gold  Bonds, 
due  Jan.  1,  1947. 

Ravenswood,  Spencer  &  Glenville  Rwy.  Co.  First  Mortgage 
6%  Bonds,  due  August  1,  1920. 

Reading  Co.  and  the  Philadelphia  &  Reading  Coal  and 
Iron  Co.  General  Mortgage  4%  Gold  Bonds,  due  Jan.  1,  1997. 

Richmond  &  Danville  R.  R.  Co.  Consolidated  Mortgage  6% 
Gold  Bonds,  due  Jan.  1,  1915. 

Richmond  &  Danville  R.  R.  Co.  Debenture  Mortgage  5% 
Bonds,  due  1927. 

Richmond  &  Petersburg  R.  R.  Co.  Consolidated  Mortgage 
6%~~and  1%  Bonds,  due  May  1,  1915. 

Richmond,  Fredericksburg  &  Potomac  R.  R.  Co.  Consoli- 
dated Mortgage  4%%  Gold  Bonds,  due  April  1,  1940. 

Richmond — Washington  Co.  4%  Guaranteed  Coll.  Trust 
Gold  Bonds,  due  June  1,  1943. 

St.  Louis,  Iron  Mountain  &  Southern  Rwy.  Co.  General 
Consolidated  Mortgage  5%  Bonds,  due  April  1,  1931. 

St.  Paul,  Minneapolis  &  Manitoba  Rwy.  Co.  Consolidated 
Mortgage  6%  Gold  Bonds,  due  July  1,  1933. 

Savannah,  Florida  &  Western  Rwy.  Co.  First  Mortgage  6% 
Gold  Bonds,  due  April  1,  1934. 

Seaboard  and  Roanoke  R.  R.  Co.  First  Mortgage  5%  Bonds, 
due  July  1,  1926. 

Silver  Springs,  Ocala  &  Gulf  R,  R.  Co.  First  Mortgage  6% 
(reduced  to  4%)  Gold  Bonds,  due  July  1,  1918. 

South  Bound  R.  R.  Co.  First  Mortgage  5%  Bonds,  due 
April  1,  1941. 

Southern  Pacific  R,  R.  Co.  First  Refunding  Mortgage  4% 


MAEYLAND.  115 

Gold  Bonds,  due  Jan.  1, 1955,  and  First  Consolidated  Mortgage 
5%  Bonds,  due  Nov.  1,  1937. 

Southern  Pacific  Branch  Rwy.  Co.  First  Mortgage  6% 
Bonds,  due  April  1,  1937. 

Southern  Rwy.  Co.  First  Consolidated  Mortgage  5%  Bonds, 
due  1994,  and  "East  Tennessee"  Reorganization  5%  Gold 
Bonds,  due  Sept.  1,  1938. 

Texas  and  Pacific  Rwy.  Co.  First  Mortgage  5%  Bonds,  due 
June  1,  2000. 

Toledo,  St.  Louis  and  Western  R.  R.  Co.  Prior  Lien  3y2% 
Gold  Bonds,  due  July  1,  1925. 

Union  Pacific  R.  R.  Co.  First  Refunding  Mortgage  4% 
Bonds,  due  2008,  and  First  Mortgage  Railroad  &  Land  Grant 
4%  Gold  Bonds,  due  July  1,  1947. 

Vandalia  R.  R.  Co.  Consolidated  Mortgage  4%  Bonds,  Series 
A,  due  Feb.  1,  1955,  and  Series  B,  due  Nov.  1,  1957. 

Virginia  Midland  Rwy.  Co.  Serial  Mortgage  6%  Bonds,  Se- 
ries C,  due  March  1,  1916.  Serial  Mortgage  5%  Bonds,  Series 
D,  due  1921,  Series  E,  due  March  1,  1926,  Series  F,  due  1931, 
and  General  Mortgage  Bonds,  due  1936. 

"Washington  Terminal  Co.  First  Mortgage  4%  and  3l/2% 
Gold  Bonds,  due  Feb.  1,  1945. 

Washington,  Ohio  &  Western  R.  R.  Co.  First  Mortgage  4% 
Bonds,  due  1924. 

West  Shore  R.  R.  Co.  Guaranteed  First  Mortgage  4% 
Bonds,  due  Jan.  1,  2361. 

West  Virginia  &  Pittsburgh  R.  R.  Co.  First  Mortgage  4% 
Bonds,  due  April  1,  1990. 

Wilmington  &  New  Bern  R.  R.  Co.  First  Mortgage  4$> 
Gold  Bonds,  due  August  1,  1947. 

Wilmington  &  Weldon  R.  R.  Co.  General  First  Mortgage 
5%  Gold  Bonds,  due  July  1,  1935. 

(F)  Equipment  Bonds. — Any  "Equipment  Bonds"  which 
are  the  direct  obligation  of  any  railroad  company  actually 
operating  its  own  road,  in  its  own  name,  any  of  whose  mort- 
gage bonds  are  authorized  under  Section  E,  sub-sections  1  or  2 
of  this  Rule,  or  any  Equipment  Bonds  secured  by  equipment 
leased  to  any  railroad  company  actually  operating  its  own 


116  STATE   LAWS   AND   DECISIONS. 

road,  in  its  own  name,  any  of  whose  mortgage  bonds  are 
good  under  Section  E,  sub-sections  1  or  2  of  this  Rule ; 

Provided,  such  bonds  are  issued  against  new  rolling  stock 
which  shall  actually  cost  said  railroad  company  at  least  ten 
per  cent,  more  than  the  amount  of  said  equipment  bonds,  and 
of  which  issue  of  equipment  bonds  the  deed  of  trust  securing 
the  same  provides  that  at  least  one-tenth  shall  be  called  in 
and  paid  each  year  subsequent  to  the  date  of  said  bonds. 

(G)  Street  Railway  Bonds. — (1)  The  following  street 
railway  securities  specifically  named: 

United  Railways  &  Electric  Company  of  Baltimore  First 
Consolidated  Mortgage  4%  Bonds,  due  March  1,  1949,  and 
underlying  bonds  of  this  corporation. 

Atlanta  Consolidated  Street  Railway  Company  of  Atlanta, 
Ga.,  First  Consolidated  Mortgage  5%  Gold  Bonds,  due  Jan. 
1,  1939. 

Boston  &  Northern  Street  Railway  Company  First  Refund- 
ing Mortgage  4%  Gold  Bonds,  due  July  1,  1954. 

Chicago  City  Railway  Company  First  Mortgage  5%  Gold 
Bonds,  due  Feb.  1,  1927. 

Chicago  Railways  Company  First  Mortgage  5%  Gold 
Bonds,  due  Feb.  1,  1927. 

City  &  Suburban  Rwy.  Co.  of  Baltimore  First  Mortgage 
5%  Gold  Bonds,  due  June  1,  1922. 

Georgia  Railway  &  Electric  Company  First  Consolidated 
Mortgage  5%  Gold  Bonds,  due  Jan.  1,  1932. 

Lindell  Railway  Company  First  Mortgage  Extended  4i^>% 
Bonds,  due  Aug.  1,  1921. 

Manhattan  Rwy.  Co.  Consolidated  Mortgage  4%  Bonds, 
due  April  1,  1990. 

Milwaukee  Electric  Railway  &  Light  Company  Refunding 
and  Extension  Mortgage  4y2%  Gold  Bonds,  due  Jan.  1,  1931. 

Milwaukee  Electric  Railway  &  Light  Company  Consoli- 
dated Mortgage  5%  Gold  Bonds,  due  Feb.  1,  1926. 

Minneapolis  Street  Railway  Company  and  St.  Paul  City 
Railway  Company  Consolidated  Mortgage  5%  Bonds,  due 
Oct.  1,  1928. 


MARYLAND.  117 

Minneapolis  Street  Railway  Company  First  Consolidated 
Mortgage  5%  Bonds,  due  Jan.  15,  1919. 

Portland  Railway  Company  First  and  Refunding  Mort- 
gage 5%  Gold  Bonds,  due  Nov.  1,  1930. 

St.  Paul  City  Railway  Company  Cable  Consolidated  Mort- 
gage 5%  Gold  Bonds,  due  Jan.  15,  1937. 

Seattle  Electric  Company  First  Mortgage  5%  Gold  Bonds,, 
due  Feb.  1,  1930. 

Third  Avenue  Railroad  of  New  York  First  Mortgage  5% 
Bonds,  due  1937,  and  First  and  Refunding  Mortgage  4% 
Bonds,  due  1960. 

Wilmington  City  (Delaware)  Railway  Co.  5%  Bonds,  due 
September  1,  1951. 

(2)  The  Bonds  of  Street  Railroad  corporations  located 
wholly  or  in  part  in  cities  of  the  United  States  having  a  popu- 
lation of  not  less  than  50,000,  according  to  the  last  Federal 
Census,  which  have  a  franchise  to  run  their  cars  over  such 
streets  and  roads  as  may  be  in  use  by  them  at  the  date  of 
the  mortgage  perpetually  or  for  a  period  of  time  ending  at 
least  fifteen  years  after  the  date  of  the  maturity  of  said  bonds. 

Provided,  that  the  mortgage  bond  indebtedness  of  any 
such  Street  Railway  does  not  exceed  the  amount  of  the  Capital 
Stock  of  the  corporation,  and  that  such  corporation  has  earned 
and  paid  regularly  in  cash  out  of  income  dividends  of  not  less 
than  4  per  cent,  per  annum  on  all  of  its  Capital  Stock  for  five 
years  next  preceding  such  investment,  and  provided  also  that 
any  first  mortgage  bond,  covering  the  whole  of  any  street 
railway,  which  has  been  consolidated  with  and  whose  track 
has  been  made  a  part  of  the  main  line  of  another  street 
railway,  whose  bonds  would  be  good  under  the  previous  pro- 
visions of  this  section,  shall  be  deemed  also  to  be  authorized 
hereunder. 

(H)  Gas  and  Miscellaneous  Securities. — Consolidated  Gas 
Co.  of  Baltimore  First  Mortgage  5%  Bonds,  due  1939. 

Consolidated  Gas  Co.  of  Baltimore  City  General  Mortgage 
41/2%  Bonds,  due  April  1,  1954. 

Milwaukee  Gas  Light  Co.  First  Mortgage  4%  Gold  Bonds,, 
due  1927. 


118  STATE   LAWS   AND   DECISIONS. 

(1)  Mortgage  on  Real  Estate  and  Ground  Rents. — (1) 

First  Mortgage  on  real  estate  in  Maryland  to  the  extent  of 
sixty  per  cent,  of  the  value  thereof  if  dwelling  house,  store,  or 
office  property  and  productive ;  fifty  per  cent,  of  its  actual 
value  if  farm  property  and  improved,  or  thirty  per  cent,  of  its 
actual  value  if  unproductive,  or  manufacturing  property. 

(2)  Ground  Bents  on  unincumbered  real  estate  situate  in 
Maryland  where  the  amount  of  the  rent  capitalized  at  6%  is 
not  over  50%  of  the  value  of  the  property  from  which  they 
issue. 

The  valuation  must  be  certified  (under  oath)  by  at  least 
two  persons  familiar  with  the  value  of  said  property,  and  the 
title  must  either  be  certified  by  a  member  of  the  Baltimore 
City  Bar  of  at  least  five  years  practice  or  must  be  guaranteed 
by  a  reputable  title  insurance  company. 

General  Provisions. 

No  Trustee  can  sell  bonds  held  by  him  individually  to 
himself  as  Trustee. 

Unless  by  special  order  of  Court  upon  petition  plainly 
setting  forth  the  fact,  not  more  than  20%  of  any  estate  shall 
be  invested  in  any  one  security. 

Should  any  fixed  interest  obligation  of  any  corporation, 
the  mortgage  bonds  of  which  are  authorized  as  Trust  Invest- 
ments upon  this  Rule,  be  defaulted  upon,  all  bonds  of  such 
corporation  or  underlying  issues  upon  its  property  shall  be 
stricken  from  the  list,  and  so  remain  until  and  unless  such 
bonds  shall  be  reinstated  by  special  order. 

Trustee   May   Not   Obtain   Personal    Benefit. 

A  trustee  may  not  obtain  any  personal  interest  in  the  trust  estate 
or  purchase  at  a  sale  thereof  either  directly  or  indirectly.  Kicketts  v. 
Montgomery,  15  Md.  46;  Cumberland  Coal  Co.  v.  Sherman,  20  Md.  117; 
North  Baltimore  Bld'g  Assn.  v.  Caldwell,  25  Md.  420;  Pairo  v.  Vickery, 
37  Md.  467. 

Good  Faith,  the   Controlling  Factor. 

The  Maryland  courts  have  not  followed  the  English  rule.  In  fact, 
the  courts  of  Maryland  have  been  in  the  habit  of  promulgating  their 
own  rules  regarding  investments  by  trustees  and  these  rules  have  been 


MARYLAND.  119 

liberal.     Discretion  and  good  faith  on  the  part  of  the  trustee  are  the 
important  requirements. 

Bank  Stock. 

In  Gray  v.  Lynch,  8  Gill  319,  trustees  who  had  invested  in  stock 
of  the  United  States  Bank  were  not  held  for  the  loss,  but  the  trust 
instrument  gave  the  trustees  power  to  invest  in  "Some  safe  and  profit- 
able stock."  By  section  237,  Article  37,  of  the  Code,  administrators 
and  guardians  under  order  of  the  Orphans'  Court  are  authorized  to 
invest  in  "bank  stock  or  any  other  good  security." 

Gas   Company    Stock. 

The  rule  of  discretion  has  been  construed  broadly  in  McCoy  v. 
Horwitz,  62  Md.  183.  A  widow  was  given  wide  discretion  as  executor, 
but  the  will  provided  that  security  valued  at  $4,000  should  be  set 
aside,  and  the  income  applied  to  the  support  of  grandsons  until  they 
became  of  age.  The  widow  did  not  set  aside  the  security,  but  in- 
vested in  gas  company  stock  which  depreciated  in  value.  Eefusing 
to  follow  the  English  law  and  the  general  rule  in  America,  the  court 
did  not  compel  the  trustee  to  make  good  the  loss  for  such  an  in- 
vestment. 

Changing  Investment. 

The  early  Maryland  cases  restrict  the  trustee  as  to  his  right  to 
change  investments.  In  Murray  v.  Feinour,  2  Md.  Ch.  419,  a  testator 
bequeathed  stock  to  a  trustee  for  the  benefit  of  certain  children.  The 
court  decided  that  in  the  absence  of  specific  power  in  the  will  or 
authorization  by  the  proper  court,  the  trustee  had  no  power  to  change 
the  investment. 

Order   of   Court. 

The  Maryland  courts  have  been  strict  in  compelling  trustees  to 
invest  trust  funds  under  their  supervision.  A  trustee  who  makes 
an  investment  without  the  sanction  of  the  courts  is  liable  for  loss.  At 
least  this  was  the  early  rule.  Wayman  v.  Jones,  4  Md.  Ch.  501. 

Although  a  trustee  may  act  with  the  best  intentions  and  the  utmost 
good  faith,  and  his  not  seeking  the  aid  and  instruction  of  the  court 
may  be  no  evidence  to  the  contrary,  if  he  wishes  to  avoid  respon- 
sibility for  losses  by  reason  of  investments  which  may  prove  to  be 
unprofitable  or  worthless,  he  should  first  obtain  authority  from  the 
court  having  jurisdiction  over  him,  unless  his  discretion  and  powers 
are  undoubted.  Lowe  v.  Convention,  etc.,  83  Md.  409. 

Personal  Security. 

A  trustee  has  no  right  to  invest  trust  funds  in  personal  securi- 
ties, and  if  he  does  so  he  makes  the  investment  at  his  peril.  Even 
where  the  investment  is  left  to  his  discretion,  it  is  not  a  sound  dis- 
cretion to  invest  in  such  securities.  Hunt  v..  Gontrum,  80  Md.  64. 


120  STATE   LAWS   AND   DECISION'S. 

Beneficiaries  May  Consent. 

A  trustee  may  invest  in  any  security  provided  he  receives  the  con- 
Bent  of  the  beneficiaries  and  the  beneficiaries  are  of  age  and  are 
fully  informed.  Hunt  v.  Gontrum,  80  Md.  64. 

Discretion  Where  Testator  Names  Trustee. 

Where  there  are  no  instructions  imposed  by  the  testator,  a  trustee 
named  by  him  is  vested  with  a  discretion  which  a  conventional  trustee 
does  not  ordinarily  possess.  A  conventional  trustee  has  limited  dis- 
cretion and  if  loss  is  due  to  an  act  by  him  not  permitted  by  the 
instrument  and  not  sanctioned  by  the  court,  he  is  liable.  But  when 
the  testator  has  selected  a  particular  person  as  trustee,  and  has  clothed 
him  with  a  discretion  in  making  investments,  and  such  trustee,  in  good 
faith  and  with  diligence,  makes  an  investment  of  trust  funds  strictly 
in  accordance  with  the  power  conferred  upon  him,  or  in  any  way 
that  a  court  of  equity  would  have  sanctioned  at  the  time,  if  advised 
of  the  circumstances,  he  will  be  exonerated  should  a  loss  ensue,  though 
he  failed  to  invoke  the  guidance  of  the  court,  or  to  procure  its  subse- 
quent ratification.  Gilbert  v.  Kolb,  85  Md.  627. 

Value. 

The  criterion  by  which  the  value  is  to  be  ascertained  is  the  esti- 
mate of  men  of  ordinary  prudence  who  would  deem  it  safe  to  make  a 
loan  of  the  same  amount  of  their  own  money  on  the  same  property. 
Gilbert  v.  Kolb,  85  Md.  627. 

Second    Mortgages. 

A  trustee  sold  property  belonging  to  the  estate  and  took  back  a 
purchase  money  mortgage  for  the  full  price  and  a  second  mortgage  on 
another  small  farm.  The  transaction  resulted  in  a  loss  to  the  estate. 
This  was  not  such  an  investment  as  a  court  would  approve;  conse- 
quently the  trustee  was  liable  for  the  loss.  Gilbert  v.  Kolb,  85  Md.  627. 

Guardian. 

The  statutes  provide  that  an  administrator  or  guardian  may  apply 
to  the  Orphans'  Court  for  an  order  directing  the  manner  and  form 
of  investment.  Annotated  Code,  Vol.  2,  Sec.  620. 

It  is  the  duty  of  the  guardian  to  apply  to  the  court,  although! 
it  seems  that  he  may  receive  the  sanction  of  the  investment  after  it 
has  been  made.  Oesterla  v.  Gaither,  90  Md.  44;  O'Hara  v.  Shepherd,  3 
Md.  Ch.  306. 

But  the  court  has  no  authority  to  authorize  an  investment  to 
be  made  to  the  guardian  himself.  Fidelity  Co.  v.  Freud,  115  Md.  29. 

Corporate  Stock. 

The  Orphans'  Court  may  order  an  investment  in  corporate  stock. 
Ex  Parte  Stone,  2  Md.  294. 


MASSACHUSETTS.  * 

TRUST    COMPANIES. 

Laws    of    1911. 
(With   Amendments   to   1914.) 

May  Invest  in  Same  Way  as  an  Individual. — Every  trust 
company  is  hereby  authorized  to  invest  the  funds  or  estates 
which  it  may  receive  and  hold  as  executor,  administrator,  ad- 
ministrator with  the  will  annexed,  receiver,  assignee,  guar- 
dian, trustee  or  conservator,  in  the  same  way,  to  the  same 
extent,  and  under  the  same  restrictions  as  an  individual  hold- 
ing a  similar  position  may  invest  such  funds  or  estates. 

Laws    of    1910,    Ch.     411. 

Loans  Outside  of  State. — No  trust  company  shall  advance 
money  or  credits  upon  notes  secured  by  deed  of  trust  or  by 
mortgage  upon  farms  or  agricultural  or  unimproved  land  out- 
side of  this  commonwealth,  except  upon  land  situated  in  the 
New  England  States  or  the  State  of  New  York,  nor  invest 
in,  nor  make  loans  upon  the  bonds  or  other  securities  of  a  com- 
pany negotiating  or  dealing  in  such  notes  so  secured  or  in 
such  mortgages. 

Continuing-  Business  of  Deceased. — The  probate  court  may, 
upon  such  notice  as  it  considers  reasonable,  authorize  an  ad- 
ministrator or  executor  to  continue  the  business  of  the  de- 
ceased, for  the  benefit  of  his  estate,  for  a  period  stated  in 
the  decree.  Such  period  shall  not  extend  more  than  one  year 
beyond  the  final  appointment  and  qualification  of  the  adminis- 
trator or  executor. 

Investments,  Sec.  16. — This  section  provides  that  trust 
companies  may  receive  money  as  court  depositaries  and  may 
also  hold  money  or  property  in  trust,  or  on  deposit  from  ex- 
ecutors, administrators,  assignees,  guardians  and  trustees. 

*  For  list  of  legal  investments  in  Massachusetts  see  Part  III. 

121 


122  STATE   LAWS   AND   DECISIONS. 

Sec.  17.  Money  or  property  received  under  the  provisions 
of  the  preceding  section  shall  be  loaned  on  or  invested  only 
in  the  authorized  loans  of  the  United  States,  or  any  of  the 
New  England  States,  the  counties,  cities  or  towns  thereof,  or 
of  the  states  of  Illinois,  Iowa,  Michigan,  Minnesota,  Wisconsin, 
or  the  counties  or  cities  thereof,  or  stocks  of  state  or  na- 
tional banks  organized  within  this  commonwealth,  or  in  the 
first  mortgage  bonds  of  a  railroad  corporation  incorporated 
in  any  of  the  New  England  states  and  whose  road  is  located 
wholly  or  in  part  in  the  same  and  which  has  earned  and  paid 
regular  dividends  on  all  its  issues  of  capital  stock  for  two 
years  last  preceding  such  loan  or  investment,  or  in  the  bonds 
of  any  such  railroad  company  unencumbered  by  mortgage,  or 
in  first  mortgages  on  real  estate  in  this  commonwealth,  or  in 
any  securities  in  which  savings  banks  may  invest,  or  upon 
notes  with  two  sureties  of  domestic  manufacturing  corpora- 
tions or  of  individuals  with  a  sufficient  pledge  as  collateral 
of  any  of  the  aforesaid  securities ;  but  all  real  estate  acquired 
by  foreclosure  of  mortgage  or  by  levy  of  execution  shall  be 
sold  at  public  auction  within  two  years  after  such  foreclosure 
or  levy. 

Sec.  23.  Creator  of  Trust  May  Authorize  Investments  in 
General  Trust  Fund. — A  person  creating  a  trust  may  direct 
whether  money  or  property  deposited  under  it  shall  be  held 
and  invested  separately  or  invested  in  the  general  trust  fund 
of  the  corporation;  and  such  corporation  acting  as  trustee 
shall  be  governed  by  directions  contained  in  a  will  or  instru- 
ment under  which  it  may  act. 

Sec.  24.  Money  or  Property  Received  in  Trust  Must  Be 
Kept  Separate. — Money,  property  or  securities  received,  in- 
vested or  loaned  under  the  provisions  of  Sections  16  to  18 
(where  company  acts  as  trustee),  inclusive,  shall  be  a  special 
deposit  in  such  corporation,  and  the  accounts  thereof  shall  be 
kept  separate.  Such  funds  and  the  investment  or  loans  thereof 
shall  be  specially  appropriated  to  the  security  and  payment 
of  such  deposits,  shall  not  be  mingled  with  the  investments 
of  the  capital  stock  or  other  money  or  property  belonging 
to  such  corporation,  or  be  liable  for  the  debts  or  obligations 


MASSACHUSETTS.  123 

thereof.  For  the  purpose  of  this  section,  such  corporation 
shall  have  a* trust  department  in  which  all  business  authorized 
by  said  Sections  16  to  18,  inclusive,  shall  be  kept  separate 
and  distinct  from  its  general  business. 

Sec.  25.  Trust  Guaranty  Fund. — The  directors  may  from 
time  to  time  set  apart  as  a  trust  guaranty  fund  such  por- 
tion of  the  profits  as  they  may  consider  expedient.  Such  fund 
shall  be  invested  in  such  securities  only  as  the  trust  deposits 
may  be  invested  in.  The  accounts  of  its  investment  and  man- 
agement, and  the  securities  in  which  it  is  invested,  shall  be 
kept  in  the  trust  department. 

Saving's  Banks. — Since  Section  17  provides  that  money  re- 
ceived by  a  trust  company  as  a  court  depositary  or  on  deposit 
from  executors,  administrators,  assignees,  guardians  and  trus- 
tees, may  be  invested  in  any  securities  in  which  savings  banks 
may  invest,  and  since  trustees  who  select  such  securities  in 
good  faith  would  undoubtedly  be  protected  by  the  courts,  it 
is  advisable  to  include  Section  68  of  the  Savings  Bank  Law, 
as  amended  to  date. 

SAVINGS  BANK  LAW. 

Sec.  68.  Deposits  and  the  income  derived  therefrom  shall 
be  invested  only  as  follows: 

FIRST  MORTGAGES  OF  REAL  ESTATE. 

First.  In  first  mortgages  of  real  estate  located  in  this  com- 
monwealth not  to  exceed  sixty  per  cent  of  the  value  of  such 
real  estate ;  but  not  more  than  seventy  per  cent  of  the  whole 
amount  of  deposits  shall  be  so  invested.  If  a  loan  is  made 
on  unimproved  and  unproductive  real  estate,  the  amount 
loaned  thereon  shall  not  exceed  forty  per  cent  of  the  value 
of  such  real  estate.  No  loan  on  mortgage  shall  be  made  ex- 
cept upon  written  application  showing  the  date,  name  of  ap- 
plicant, amount  asked  for  and  security  offered,  nor  except 
upon  the  report  of  not  less  than  two  members  of  the  board  of 
investment  who  shall  certify  on  said  application,  according  to 
their  best  judgment,  the  value  of  the  premises  to  be  mort- 


124  STATE  LAWS  AND  DECISIONS. 

gaged;  and  such  application  shall  be  filed  and  preserved  with 
the  records  of  the  corporation. 

At  the  expiration  of  every  such  loan  made  for  a  period 
of  five  or  more  years  not  less  than  two  members  of  the  board 
of  investment  shall  certify  in  writing,  according  to  their  best 
judgment,  the  value  of  the  premises  mortgaged;  and  the 
premises  shall  be  revalued  in  the  same  manner  at  intervals  of 
not  more  than  five  years  so  long  as  they  are  mortgaged  to 
such  corporation.  Such  report  shall  be  filed  and  preserved 
with  the  records  of  the  corporation.  If  such  loan  is  made  on 
demand  or  for  a  shorter  period  than  five  years,  a  revaluation 
in  the  manner  above  prescribed  shall  be  made  of  the  premises 
mortgaged  not  later  than  five  years  after  the  date  of  such 
loan  and  at  least  every  fifth  year  thereafter.  If  at  the  time  a 
revaluation  is  made  the  amount  loaned  is  in  excess  of  sixty 
per  cent,  or  in  the  case  of  unimproved  and  unproductive  real 
estate  in  excess  of  forty  per  cent,  of  the  value  of  the  premises 
mortgaged,  a  sufficient  reduction  in  the  amount  of  the  loan 
shall  be  required,  as  promptly  as  may  be  practicable,  to  bring 
the  loan  within  sixty  per  cent,  or  in  the  case  of  unimproved 
and  unproductive  real  estate  within  forty  per  cent  of  the 
value  of  said  premises. 

"Whenever  in  the  opinion  of  the  Commissioner  an  excessive 
loan  has  been  made,  or  is  about  to  be  made,  upon  real  estate, 
he  shall  have  authority  to  cause  an  appraisal  of  said  real 
estate  to  be  made  at  the  expense  of  the  bank  making  the 
loan.  One  appraiser  shall  be  named  by  the  Commissioner,  one 
by  the  bank  making  the  loan,  and  a  third  by  the  two  thus 
named.  Said  appraisers  shall  determine  the  value  of  said 
real  estate  and  certify  the  same  in  writing  to  the  Com- 
missioner and  to  the  bank.  If  it  shall  appear  from  said  ap- 
praisal that  said  loan  is  in  excess  of  the  amount  allowed  by 
the  provisions  of  this  section,  the  Commissioner  may  make 
such  order  in  relation  thereto  as  he  may  deem  advisable. 

PUBLIC    FUNDS. 

Second,  (a)  In  the  public  funds  of  the  United  States, 
or  of  any  of  the  New  England  states. 


MASSACHUSETTS.  125 

(b)  In  the  bonds  or  notes  of  a  county,  city  or  town  of 
this    commonwealth. 

(c)  In  the  bonds  or  notes  of  an  incorporated  district  in 
this  commonwealth  whose  net  indebtedness  does  not  exceed 
five  per  cent  of  the  last  preceding  valuation  of  the  prop- 
erty therein  for  the  assessment  of  taxes. 

(d)  In  the  bonds  or  notes  of  any  city  of  Maine,  New 
Hampshire,  Vermont,  Rhode  Island  or  Connecticut,  whose  net 
indebtedness  does  not  exceed  five  per  cent  of  the  last  pre- 
ceding valuation  of  the  property  therein  for  the  assessment 
of  taxes;  or  of  any  county  or  town  of  said  states  whose  net 
indebtedness  does  not  exceed  three  per  cent  of  such  valua- 
tion;  or   of  any  incorporated  water   district   of  said   states 
which   has   within   its   limits  more   than   five    thousand   in- 
habitants, and  whose  bonds  or  notes  are  a  direct  obligation 
on  all  the  taxable  property  of  such  district,  and  whose  net 
indebtedness  does  not  exceed  three  per  cent  of  such  valua- 
tion: provided,  that  there  is  not  included  within  the  limits 
of  such  water  district,  either  wholly  or  in  part,  any  city  or 
town  the  bonds  or  notes  of  which   are  not   a  legal  invest- 
ment. 

(e)  In  the  legally  authorized  bonds  of  the  states  of  New 
York,  Pennsylvania,   Ohio,  Indiana,   Illinois,  Michigan,   Wis- 
consin, Minnesota,  Missouri  and  Iowa,  and  of  the  District  of 
Columbia,  and  in  the  legally  authorized  bonds  for  municipal 
purposes,  and  in  the  refunding  bonds  issued  to  take  up  at 
maturity  bonds  which  have  been  issued  for  other  than  munici- 
pal purposes,  but  on  which  the  interest  has  been  fully  paid, 
of  any   city  of  the  aforesaid  states  which  has  at  the  date 
of  such  investment  more  than  thirty  thousand  inhabitants, 
as  established  by  the  last  national  or  state  census,  or  city 
census  certified  to  by  the  city  clerk  or  treasurer  of  said  city 
and  taken  in  the  same  manner  as  a  national  or  state  census, 
preceding  such  investment,  and  whose  net  indebtedness  does 
not  exceed  five  per  cent  of  the  valuation  of  the  taxable  prop- 
erty therein,  to  be  ascertained  by  the  last  preceding  valua- 
tion of  property  therein  for  the  assessment  of  taxes;  and  of 
any  city  of  the  aforesaid  states  or  of  any  of  the  New  England 


126  STATE  LAWS  AND  DECISIONS. 

states  or  of  the  states  of  Maryland  and  Kentucky,  which  has 
at  the  date  of  such  investment  more  than  two  hundred  thou- 
sand inhabitants,  so  established,  and  whose  net  indebtedness 
does  not  exceed  seven  per  cent  of  the  valuation  of  the  taxable 
property  therein,  established  and  ascertained  as  above  pro- 
vided. 

In  subdivisions  (d)  and  (e)  of  this  clause  the  words  "net 
indebtedness"  mean  the  indebtedness  of  a  county,  city,  town 
or  district  omitting  debts  created  for  supplying  the  in- 
habitants with  water  and  debts  created  in  anticipation  of 
taxes  to  be  paid  within  one  year,  and  deducting  the  amount 
of  sinking  funds  available  for  the  payment  of  the  indebted- 
ness included. 

RAILROAD     BONDS. 

Massachusetts    Railroads. 

Third,  (a)  In  the  bonds  or  notes,  issued  in  accordance 
with  the  laws  of  this  commonwealth,  of  a  railroad  corpora- 
tion incorporated  therein  the  railroad  of  which  is  located 
wholly  or  in  part  therein,  which  has  paid  in  dividends  in 
cash  an  amount  equal  to  not  less  than  four  per  cent  per 
annum  on  all  its  outstanding  issues  of  capital  stock  in  each 
fiscal  year  for  the  five  years  next  preceding  such  investment, 
or  in  the  first  mortgage  bonds  of  a  terminal  corporation  in- 
corporated in  this  commonwealth  and  whose  property  is 
located  therein,  which  is  owned  and  operated,  or  the  bonds 
of  which  are  guaranteed  as  to  principal  and  interest,  or  as- 
sumed, by  such  railroad  corporation.  Any  shares  of  the  cap- 
ital stock  of  a  railroad  corporation  leased  to  such  railroad 
corporation,  which  are  owned  by  said  lessee  coporation,  shall 
not  be  considered  as  outstanding  within  the  meaning  of  this 
subdivision. 

New    England    Railroads. 

-. 

(b) '  In  the  bonds  or  assumed  bonds  of  a  railroad  corpora- 
lion  incorporated  in  any  of  the  New  England  states,  at  least 
•pne-half  of  the  railroad  of  which  is  located  in  said  states, 
ivvhether  such  corporation  is  in  possession  of  and  is  operating 


MASSACHUSETTS.  127 

its  own  road  or  is  leased  to  another  railroad  corporation :  pro- 
vided, either  that  such  bonds  shall  be  secured  by  a  first  mort- 
gage of  the  whole  or  a  part  of  the  railroad  and  railroad  prop- 
erty of  such  corporation  or  by  a  refunding  mortgage  as  de- 
scribed in  paragraph  (3)  or  (4)  of  subdivision  (g),  or  that 
if  the  railroad  and  railroad  property  of  such  corporation  are 
unencumbered  by  mortgage  such  bonds  shall  be  issued  under 
the  authority  of  one  of  said  states  which  provides  by  law 
that  no  such  railroad  corporation  which  has  issued  bonds 
shall  subsequently  execute  a  mortgage  upon  its  road,  equip- 
ment and  franchise  or  upon  any  of  its  real  or  personal  prop- 
erty, without  including  in  and  securing  by  such  mortgage 
all  bonds  previously  issued  and  all  its  preexisting  debts  and 
liabilities,  which  provision,  so  enacted  in  such  state,  shall  have 
been  accepted  by  the  stockholders  of  such  corporation;  and 
provided,  that  such  corporation  has  paid  in  dividends  in  cash 
an  amount  equal  to  not  less  than  four  per  cent  per  annum  on 
all  its  outstanding  issues  of  capital  stock  in  each  fiscal  year 
for  the  five  years  next  preceding  such,  investment. 

(c)  In  the  first  mortgage  bonds  or  assumed  first  mortgage 
bonds  or  in  the  bonds  secured  by  a  refunding  mortgage  as 
described  in  paragraphs   (3)   or   (4)   of  subdivision   (g),  of  a 
railroad  corporation  incorporated  in  any  of  the  New  England 
states,  the  railroad  of  which  is  located  wholly   or   in   part 
therein,  which  have  been  guaranteed  as  to  principal  and  in- 
terest by  a  railroad  corporation  described  in  subdivisions  (a) 
or    (b)    which  is  in  possession  of  and  is  operating  its  own 
road. 

(d)  No  bond  shall  be  made  a  legal  investment  by  sub- 
division (b)   unless  the  corporation  which  issued  or  assumed 
such  bond  has,  during  its  fiscal  year  next  preceding  the  date 
of  such  investment,  paid  in  dividends  on  its  capital  stock  an 
amount  equal  to    one-third  of  the  total  amount   of  interest 
paid  on  all  its  direct  and  assumed  funded  indebtedness. 

No  bond  shall  be  made  a  legal  investment  by  subdivision 
(c)  unless  the  corporation  which  guaranteed  such  bond  has, 
during  its  fiscal  year  next  preceding  such  investment,  paid 
in  dividends  on  its  capital  stock  an  amount  equal  to  one- 


128  STATE   LAWS   AND   DECISIONS. 

third  of  the  total  amount  of  interest  paid  on  all  its  direct, 
assumed  and  guaranteed  funded  indebtedness. 

Other    Railroads. 

Description  of  Corporation. 

(e)  In  the  mortgage  bonds,  as  described  in  any  of  the 
following  subdivisions  of  this  clause,  of  any  railroad  corpora- 
tion incorporated  under  the  laws  of  any  of  the  United  States : 

Provided,  that  during  each  of  the  ten  fiscal  years  of  such 
railroad  corporation  next  preceding  the  date  of  such  invest- 
ment,— 

(1)  Such  railroad  corporation  owned  in  fee  not  less  than 
five  hundred  miles  of  standard  gauge  railroad,  exclusive  of 
sidings,  within  the  United  States,  or  if  such  corporation  owned 
in  fee  less  than  five  hundred  miles  of  such  railroad,  the  gross 
earnings  of  such   corporation,  reckoned  as  hereinafter  pro- 
vided, shall  have  been  not  less  than  fifteen  million  dollars; 

(2)  Such  railroad  corporation  shall  have   paid  the  ma- 
tured principal  and  interest  of  all  its  mortgage  indebtedness; 

(3)  Such  railroad   corporation  shall  have  paid  in  divi- 
dends in  cash  to  its  stockholders  an  amount  equal  to  at  least 
four  per  cent  upon  all  its  outstanding  capital  stock; 

(4)  The  gross  earnings  from  the  operation  of  the  prop- 
erty of  such  railroad  corporation,  including  therein  the  gross 
earnings  of  all  railroads  leased   and  operated  .or  controlled 
and  operated  by   said   corporation,   and   the   gross   earnings 
from  the  sale  of  coal  from  mines  owned  or  controlled  by  it, 
shall  not  have  been  less  in  amount  than  five  times  the  amount 
necessary  to  pay  the  interest  payable  upon  its   entire   out- 
standing  indebtedness,   the  rentals   of  all  leased   lines,   and 
the  interest  on  all  the  outstanding  indebtedness  of  railroads 
controlled  and  operated  which  is  not  owned  by  said  corpora- 
tions after  deducting  from  said  interest  and  rentals  interest 
and  dividends  received  from  the   stocks,  bonds  or  notes  of 
railroad  corporations  not  operated  by  said  corporation,  which 
have  been  deposited  with  a  trustee  as  the  only  security  to 
secure  the  payment  of  bonds  or  notes  issued  by  said  corpora- 


MASSACHUSETTS.  129 

tion,  but  not  in  excess  of  the   interest  on   said  last-named 
bonds  or  notes; 

And  further  provided,  that, — 

(5)  No  bonds  shall  be  made  a  legal  investment  by  sub- 
division  (g)    in  case  the  mortgage  securing  the  same  shall 
authorize  a  total  issue  of  bonds  which,  together  with  all  out- 
standing prior  debts  of  the  issuing  or  assuming  corporation, 
including  all  bonds  not  issued  that  may  legally  be  issued 
under  any  of  its  prior  mortgages  or  of  its  assumed  prior 
mortgages,  after  deducting  therefrom,  in  case  of  a  refunding 
mortgage,  the  bonds  reserved  under  the  provisions  of  said 
mortgage  to  retire  prior  lien  debts  at  maturity,  shall  exceed 
three   times   the  outstanding  capital  stock  of  said   corpora- 
tion at  the  date  of  such  investment; 

(6)  No  bonds  shall  be  made  a  legal  investment  by  sub- 
division  (i)   or  (j)  in  case  the  mortgage  securing  the  same 
shall  authorize  a  total  issue  of  bonds  which,   added  to  the 
total  debt  of  the  guaranteeing  corporation  as  defined  in  para- 
graph   (5),   including  therein  the  authorized  amount  of  all 
previously  guaranteed  bond  issues,  shall  exceed  three  times 
the  capital  stock  of  such  guaranteeing  corporation  outstand- 
ing at  the  date  of  such  investment;  nor  in  case  at  said  date 
the   total   debt  of  the  corporation  which  issued  said  bonds 
shall  exceed  three  times  its  outstanding  capital  stock; 

In  the  case  of  a  mortgage  executed  prior  to  the  passage 
of  this  act,  under  which  the  total  amount  of  bonds  which  may 
be  issued  is  not  specifically  stated,  the  amount  of  bonds  out- 
standing thereunder  at  the  date  of  such  investment  shall  be 
considered,  for  the  purposes  of  paragraph  (5)  and  of  this 
paragraph,  as  the  total  authorized  issue; 

(7)  Any  railroad  corporation  which  is  mentioned  in  sub- 
division (c)  of  clause  fourth  of  section  twenty-six  of  chapter 
one  hundred  and  thirteen  of  the  Revised  Laws  shall  be  con- 
sidered as  having  complied  with  all  the  requirements  of  this 
subdivision  preceding  paragraph  (5)  up  to  and  including  the 
fiscal  year  of  said  corporation  in  which  this  act  is  passed. 


130  STATE   LAWS    AND   DECISIONS. 


Description  of  Bonds. 

Definition  of  First  Mortgage. — (f)  Whenever  the  term 
"first  mortgage"  is  used  in  the  following  subdivisions,  it  shall 
mean,  unless  otherwise  qualified,  a  first  mortgage  on  not  less 
than  seventy-five  per  cent  of  the  railroad  owned  in  fee  at  the 
date  of  the  mortgage  by  the  railroad  corporation  on  the  rail- 
road of  which  said  mortgage  is  a  lien,  but  in  no  case  on  less 
than  one  hundred  continuous  miles  of  standard  gauge  rail; 
road,  exclusive  of  sidings:  provided,  that, — 

Seventy-five  per  cent  of  the  railroad  subject  to  the  lien 
of  said  mortgage  is  connected; 

For  five  years  prior  to  the  date  of  investment  therein  all 
the  railroad  subject  to  the  lien  of  said  mortgage  at  the  date 
of  execution  thereof  has  been  operated  by,  and  its  opera- 
tions included  in,  the  operations  of  the  railroad  corporation 
which  issues,  assumes  or  guarantees  said  bonds; 

The  date  of  said  mortgage  is  at  least  five  years  prior  to 
the  date  of  such  investment ;  except  that  a  first  mortgage 
given  in  substitution  for  and  not  greater  in  amount  than  such 
a  first  mortgage,  and  covering  the  same  railroad  property, 
shall  be  considered  to  be  in  accordance  with  this  require- 
ment. 

Direct  Obligations. — (g)  Bonds  issued  or  assumed  by  a 
railroad  corporation  described  in  subdivision  (e),  which  are 
secured  by  a  mortgage  which  was  at  the  date  thereof  or  is  at 
the  date  of  such  investment: — 

(1)  A  first  mortgage  on  a  railroad  owned  in  fee  by  the 
corporation  issuing  or  assuming  said  bonds,  except  that,  if 
it  is  not  a  first  mortgage  on  seventy-five  per  cent  of  all 
such  railroad  owned  in  fee  by  said  corporation,  it  shall  be  a 
first  mortgage  on  at  least  seventy-five  per  cent  of  the  railroad 
subject  to  the  lien  of  said  mortgage  at  the  date  tliereof ;  but 
if  any  stocks  or  bonds  are  deposited  with  the  trustee  of  said 
mortgage  as  part  security  therefor,  representing  or  covering 
railroad  mileage  not  owned  in  fee,  the  bonds  secured  by  said 
mortgage  shall  not  become  legal  investments  unless  said  cor- 
poration owns  in  fee  at  least  seventy-five  per  cent  of  the  total 


MASSACHUSETTS.  131 

mileage  which  is  subject  to  the  lien  of  said  mortgage  and 
which  is  represented  or  covered  by  said  stocks  or  bonds; 

(2)  A  first  mortgage,  or  a  mortgage  or  trust  indenture 
which  is  in  effect  a  first  mortgage  upon  all  the  railroad  sub- 
ject to  the  lien  of  said  mortgage  or  trust  indenture  by  virtue 
of  the  irrevocable  pledge  with  the  trustee  thereof  of  an  entire 
issue  or  issues  of  bonds  which  are  a  first  lien,  upon  the  rail- 
road of  a  railroad  corporation  which  is  owned  and  operated, 
controlled  and  operated  or  leased  and  operated  by  the  cor- 
poration  issuing   or   assuming    said    bonds; 

(3)  A  refunding  mortgage  which  covers  at  least  seventy- 
five  per  cent  of  the  railroad  owned  in  fee  by  said  corpora- 
tion at  the  date  of  said  mortgage  and  provides  for  the  re- 
tirement of  all  outstanding  mortgage  debts  which  are  a  prior 
lien  upon  said  railroad  owned  in  fee  and  covered  by  said  re- 
funding mortgage    at   the   date  thereof;   but  if  any   of  the 
bonds  which  said  refunding  mortgage  is  given  to  refund  are 
secured  on  a  railroad  not  owned  in  fee  by  the  corporation 
executing  said  refunding  mortgage,  there  shall  be  conveyed 
and  assigned  to  the  trustee  of  said  refunding  mortgage  either 

At  least  seventy-five  per  cent  of  the  railroad  on  which  each 
issue  of  bonds  to  be  refunded  is  secured,  free  from  any  mort- 
gage lien  except  that  of  the  mortgage  or  mortgages  securing 
the  bonds  to  be  refunded,  or 

At  least  seventy-five  per  cent  of  the  outstanding  bonds 
of  each  issue  which  is  secured  by  a  mortgage  lien  upon  such 
railroad;  and  all  of  said  railroad  not  owned  in  fee  which  is 
so  subjected  to  the  lien  of  said  refunding  mortgage  shall  be 
the  railroad  of  one  or  more  railroad  corporations  which  are 
owned  and  operated,  controlled  and  operated,  or  leased  and 
operated  by  the  corporation  issuing  or  assuming  said  refund- 
ing mortgage  bonds; 

But  in  no  case  shall  the  bonds  secured  by  said  refund- 
ing mortgage  become  a  legal  investment  unless  they  ma- 
ture at  a  later  date  than  any  bonds  which  said  refunding 
mortgage  is  given  to  refund,  nor  unless  the  total  mileage  sub- 
jected to  the  lien  of  said  refunding  mortgage  in  accordance 
with  the  requirements  of  this  paragraph  is  at  least  twenty- 


132  STATE  LAWS   AND  DECISIONS. 

five  per  cent  greater  than  the  mileage  covered  by  any  one 
of  the  mortgages  securing  bonds  which  said  refunding  mort- 
gage is  given  to  refund; 

(4)  A  mortgage  upon  not  less  than  ten  per  cent  of  the 
railroad,  exclusive  of  sidings,  owned  in  fee  at  the  date  of  said 
mortgage  by  the  corporation  issuing  or  assuming  said  bonds, 
but  in  no  case  on  less  than  five  hundred  continuous  miles  of 
standard  gauge  railroad:  provided,  that, — 

Said  mortgage  is  a  first  or  second  lien  upon  not  less  than 
seventy-five  per  cent  of  the  total  railroad  covered  by  said 
mortgage  at  the  date  thereof,  and  which  provides  for  the  re- 
tirement of  all  mortgage  debts  which  are  a  prior  lien  upon 
said  railroad  owned  in  fee  and  covered  by  said  mortgage,  at 
the  date  of  the  execution  thereof; 

The  bonds  secured  by  said  mortgage  mature  at  a  later 
date  than,  and  cover  a  mileage  at  least  twenty-five  per  cent 
greater  than  is  covered  by,  any  of  the  bonds  secured  by  a 
prior  lien  mortgage  so  to  be  retired; 

The  date  of  said  mortgage  shall  be  at  least  five  years 
prior  to  the  date  of  such  investment. 

Bonds  Underlying-  Refunding  Mortgage. — (h)  Mortgage 
bonds  or  bonds  secured  by  mortgage  bonds  which  are  a  direct 
obligation  of,  or  which  have  been  assumed,  or  which  have 
been  guaranteed  by  endorsement  as  to  both  principal  and  in- 
terest, by  a  railroad  corporation  whose  refunding  mortgage 
bonds  are  made  a  legal  investment  under  paragraphs  (3)  or 
(4)  of  subdivision  (g)  :  provided,  that: — 

Said  bonds  are  prior  to  and  are  to  be  refunded  by  such 
refunding  mortgage; 

Said  refunding  mortgage  covers  all  the  real  property  upon 
which  the  mortgage  securing  said  underlying  bonds  is  a  lien; 

In  the  case  of  bonds  so  guaranteed  or  assumed  the  cor- 
poration issuing  said  bonds  is  owned  and  operated,  controlled 
and  operated,  or  leased  and  operated,  by  said  railroad  cor- 
poration. 

Guaranteed  Obligations. — (i)  Bonds  which  have  been 
guaranteed  by  endorsement  as  to  both  principal  and  in- 


MASSACHUSETTS.  133 

terest  by  a  railroad  corporation  which  has  complied  with  all 
the  provisions  of  subdivision  (e)  :  provided  that, — 

Said  bonds  are  secured  by  a  first  mortgage  on  the  railroad 
of  a  railroad  corporation  which  is  owned  and  operated,  con- 
trolled and  operated,  or  leased  and  operated,  by  the  corpora- 
tion guaranteeing  said  bonds; 

In  the  case  of  a  leased  railroad,  the  entire  capital  stock  of 
which,  except  shares  qualifying  directors,  is  not  owned  by  the 
lessee,  the  rental  includes  an  amount  to  be  paid  to  the  stock- 
holders of  said  leased  railroad  equal  to  at  least  four  per  cent 
per  annum  upon  that  portion  of  the  entire  capital  stock 
thereof  outstanding  which  is  owned  by  the  lessee. 

(j)  First  mortgage  bonds  of  a  railroad  corporation  which 
during  each  of  its  ten  fiscal  years  next  preceding  the  date  of 
such  investment  has  complied  with  all  the  requirements  of 
paragraphs  (2),  (3)  and  (4)  of  subdivision  (e),  provided  that 
said  bonds  are  guaranteed  by  endorsement  as  to  both  prin- 
cipal and  interest  by  a  railroad  corporation  which  has  com- 
plied with  all  the  requirements  of  subdivision  (e)  preceding 
paragraph  (5),  notwithstanding  that  the  railroad  of  said 
issuing  corporation  is  not  operated  by  said  guaranteeing  cor- 
poration. 

Corporations  Not  to  Lose  Credit  by  Temporary  Disturbance  of  Relation 
of  Gross  Earnings  to  Fixed  Charges. 

(k)  Bonds  which  have  been  or  shall  become  legal  in- 
vestments under  any  of  the  provisions  of  this  act  shall  not 
be  rendered  illegal  although  the  corporation  issuing,  assum- 
ing or  guaranteeing  such  bonds  shall  fail  for  a  period  not  ex- 
ceeding two  successive  fiscal  years  to  comply  with  the  re- 
quirements of  paragraph  (4)  of  subdivision  (e)  ;  but  no  fur- 
ther investment  in  the  bonds  issued,  assumed  or  guaranteed 
by  said  corporation  shall  be  made  during  said  period.  If 
after  the  expiration  of  said  period  said  corporation  complies 
for  the  following  fiscal  year  with  all  the  requirements  of  sub- 
division (e),  it  shall  be  regarded  as  having  complied  there- 
with during  said  period. 


134  STATE    LAWS    AND   DECISIONS. 

Bonds  Not  to  Become  Illegal  on  Account  of  Consolidation. 

(1)  Bonds  which  have  been  or  shall  become  legal  invest- 
ments under  any  of  the  provisions  of  this  act  shall  not  be 
rendered  illegal,  although  the  property  upon  which  they  are 
secured  has  been  or  shall  be  conveyed  to  or  legally  acquired 
by  another  railroad  corporation,  and  although  the  corpora- 
tion which  issued  or  assumed  said  bonds  has  been  or  shall 
be  consolidated  with  another  railroad  corporation,  if  the  con- 
solidated or  purchasing  corporation  shall  assume  the  payment 
of  said  bonds  and  so  long  as  it  shall  continue  to  pay  regu- 
larly interest  or  dividends,  or  both,  upon  the  securities  issued 
against,  in  exchange  for,  or  to  acquire  the  stock  of  the 
corporation  consolidated,  or  the  property  purchased,  or  upon 
securities  subsequently  issued  in  exchange  or  substitution 
therefor,  to  an  amount  at  least  equal  to  four  per  cent  per 
annum  upon  the  capital  stock  outstanding  at  the  time  of  such 
consolidation  or  purchase  of  said  corporation  which  issued 
or  assumed  said  bonds. 


Credit  of  a  Corporation  Not  to  be  Lost  by  Consolidation. 

(m)  If  a  railroad  corporation  which  has  complied  with  all 
the  requirements  of  subdivision  (e)  preceding  paragraph  (5), 
except  that  the  period  of  compliance  is  less  than  ten,  but  not 
less  than  five  successive  years,  shall  be,  or  shall  have  been, 
thereupon  consolidated  or  merged  with,  or  its  railroad  pur- 
chased and  all  of  the  debts  of  such  corporation  assumed  by, 
another  railroad  corporation  incorporated  under  the  laws  of 
any  of  the  United  States,  such  corporation  so  succeeding  shall 
be  considered  as  having  complied  with  all  the  provisions  of 
subdivision  (e)  preceding  paragraph  (5)  during  those  suc- 
cessive years  next  preceding  the  date  of  such  consolidation, 
merger  or  purchase  in  which  all  said  consolidated,  merged 
or  purchased  corporations,  if  considered  as  one  continuous 
corporation  in  ownership  and  possession,  would  have  so  com- 
plied: provided,  that  said  succeeding  corporation  shall  con- 
tinue so  to  comply  for  a  further  period  which  shall  make 


MASSACHUSETTS.  135 

such  compliance  equivalent  to  at  least  ten  successive  years, 
but  which  shall  be  in  no  case  less  than  the  two  fiscal  years 
next  following  said  consolidation,  merger  or  purchase. 

Street   Railway   Corporations    Are   Not  Railroad   Corporations. 

(n)  In  this  act,  unless  the  context  otherwise  requires, 
"railroad  corporation"  means  a  corporation  which  owns  or  is 
in  possession  of  and  operating  a  railroad  or  railway  of  the 
class  usually  operated  by  steam  power.  Street  railway  cor- 
porations are  not  railroad  corporations  within  the  meaning 
of  this  act. 

Present  Investments  Not  to  Become  Illegal. 

Fourth.  The  provisions  of  this  act  shall  not  render  illegal 
the  investment  in  any  mortgages  of  real  estate  held  by  such 
corporation  at  the  time  of  its  passage,  nor  the  investment  at 
such  time  or  thereafter  in  any  issue  of  bonds  or  notes  dated 
prior  to  its  passage,  in  which  such  corporation  was  then  au- 
thorized to  invest,  so  long  as  such  bonds  or  notes  continue 
to  comply  with  the  requirements  of  law  then  in  force. 

STREET   RAILWAY   BONDS. 

Fifth.  In  the  bonds  of  any  street  railway  company  incor- 
porated in  this  commonwealth,  the  railway  of  which  is  located 
wholly  or  in  part  therein,  and  which  has  earned  and  paid 
in  dividends  in  cash  an  amount  equal  to  at  least  five  per  cent 
upon  all  its  outstanding  capital  stock  in  each  of  the  five 
years  last  preceding  the  certification  by  the  board  of  railroad 
commissioners  hereinafter  provided  for.  No  such  investment 
shall  be  made  unless  said  company  appears  from  returns  made 
by  it  to  the  board  of  railroad  commissioners  to  have  properly 
paid  such  dividends  without  impairment  of  assets  or  capital 
stock,  and  said  board  shall  on  or  before  the  fifteenth  day  of 
January  in  each  year  certify  and  transmit  to  the  bank  com- 
missioner a  list  of  such  street  railway  companies. 

Dividends  paid  by  way  of  rental  to  stockholders  of  a  leased 


136  STATE   LAWS    AND   DECISIONS. 

street  railway  company  shall  be  deemed  to  have  been  earned 
and  paid  by  said  company  within  the  meaning  of  this  clause, 
provided  that  said  company  shall  have  annually  earned,  and 
properly  paid  in  dividends  in  cash,  without  impairment  of 
assets  or  capital  stock,  an  amount  equal  to  at  least  five  per 
cent  upon  all  its  outstanding  capital  stock  in  each  of  the  five 
fiscal  years  next  preceding  the  date  of  the  lease  thereof. 

If  two  or  more  street  railway  companies  have  been  con- 
solidated by  purchase  or  otherwise  during  the  five  years 
prior  to  said  certification,  the  payment  severally  from  the 
earnings  of  each  year  of  dividends  equivalent  in  the  aggre- 
gate to  a  dividend  of  five  per  cent  on  the  aggregate  capital 
stocks  of  the  several  companies  during  the  years  preceding 
such  consolidation  shall  be  sufficient  for  the  purpose  of 
this  act. 

TELEPHONE    COMPANY    BONDS. 

Sixth.  In  the  bonds  of  any  telephone  company  subject  to 
the  provisions  of  section  thirty-seven  of  chapter  fourteen  of 
the  Revised  Laws,  and  of  which  a  majority  of  the  directors 
are  residents  of  the  commonwealth: — 

Provided,  that  during  each  of  the  five  fiscal  years  of  such 
telephone  company  next  preceding  the  date  of  such  invest- 
ment— 

(1)  The   gross   income    of  such  telephone   company  shall 
have  been  not  less  than  ten  million  dollars  per  annum. 

(2)  Such  telephone  company  shall  have  paid  the  matured 
principal  and  interest  of  all  its  indebtedness. 

(3)  Such  telephone  company  shall  have  paid  in  dividends 
in  cash  an  amount  equal  to  not  less  than  six  per  cent  per 
annum  on  all  its  outstanding  issues  of  capital  stock. 

(4)  The  dividends  paid  on  the  capital  stock  of  such  tele- 
phone   company    shall    not    have    been    less    than    the    total 
amount  necessary  to  pay  the  interest  upon  its  entire    out- 
standing indebtedness. 

And  further  provided,  that  such  bonds  shall  be  secured 
either  (a)  by  a  first  mortgage  upon  at  least  seventy-five  per 
cent  of  the  property  of  such  telephone  company,  or  (b)  by 


MASSACHUSETTS.  137 

the  deposit  with  a  trust  company  incorporated  under  the  laws 
of  this  commonwealth  of  bonds  and  shares  of  stock  of  other 
telephone  corporations,  under  an  indenture  of  trust  which 
limits  the  amount  of  bonds  so  secured  to  seventy-five  per  cent 
of  the  value  of  the  securities  deposited  as  stated  and  deter- 
mined in  said  indenture,  and  provided  that  during  each  of 
the  five  years  next  preceding  such  investment  the  annual  in- 
terest and  dividends  paid  in  cash  on  the  securities  deposited 
have  amounted  to  not  less  than  fifty  per  cent  in  excess  of  the 
annual  interest  on  the  bonds  outstanding  and  secured  by  said 
deposit.  Not  more  than  two  per  cent  of  the  deposits  of  any 
savings  bank  shall  be  invested  in  the  bonds  of  telephone  com- 
panies. 

BANK     STOCKS    AND    DEPOSITS    IN     BANKS. 

Seventh.  In  the  stock  of  a  banking  association  located 
in  the  New  England  states  and  incorporated  under  the  au- 
thority of  the  United  States,  or  in  the  stock  of  a-^trust  com- 
pany incorporated  under  the  laws  of  and  doing  business 
within  this  commonwealth,  but  such  corporation  shall  not 
hold,  both  by  way  of  investment  and  as  security  for  loans, 
more  than  twenty  per  cent  of  its  deposits  in  the  stock  of  such 
associations  or  companies,  nor  in  any  one  such  association 
or  company  more  than  three  per  cent  of  its  deposits  in,  nor 
more  than  one  hundred  thousand  dollars  nor  more  than  one- 
quarter  of  the  capital  stock  of,  such  association  or  company. 

Such  corporation  may  deposit  not  more  than  two  and  one- 
half  per  cent  of  its  deposits  in  any  banking  association  incor- 
porated under  the  authority  of  the  United  States  and  located 
in  this  commonwealth,  and  in  any  trust  company  incorporated 
in  this  commonwealth;  but  such  deposit  shall  not  in  any  case 
exceed  five  hundred  thousand  dollars  nor  twenty-five  per  cent 
of  the  capital  stock  and  surplus  fund  of  such  depositary. 

LOANS    ON    PEKSONAL    SECUEITY. 

Eighth.  In  loans  of  the  classes  hereafter  described,  pay- 
able and  to  be  paid  or  renewed  at  a  time  not  exceeding  one 


138  i  STATE   LAWS   AND   DECISIONS. 

year  from  the  date  thereof;  but  not  more  than  one-third  of 
the  deposits  and  income  shall  so  be  invested,  nor  shall  the 
total  liabilities  to  such  corporation  of  a  personal  partnership, 
association  or  corporation  for  money  borrowed  upon  personal 
security,  including  in  the  liabilities  of  a  partnership  or  com- 
pany not  incorporated  the  liabilities  of  the  several  members 
thereof,  exceed  five  per  cent  of  such  deposits  and  income ;  but 
said  limitations,  except  as  to  time  in  which  said  loans  shall 
be  paid  or  renewed,  shall  not  apply  to  loans  made  under  the 
provisions  of  paragraph  (2)  of  subdivision  (e)  of  this  clause. 

(a)  A  note  which  is  the  joint  and  several  obligation  of 
three  or  more  responsible  citizens  of  this  commonwealth :  pro- 
vided, that  the  total  liabilities  to  such  corporation  of  a  person, 
partnership   or  association,   for   money  borrowed  under  this 
subdivision,  including  in  the   liabilities  of  a  partnership   or 
company  not  incorporated  the  liabilities  of  the  several  mem- 
bers thereof,  shall  not  exceed  one  per  cent  of  the  deposits 
of  such  corporation. 

(b)  A  note,  with  one  or  more    substantial    sureties    or 
endorsers:    (1)  Of  a  corporation  incorporated  in  this  common- 
wealth; or   (2)   Of  a  manufacturing  corporation  with  a  com- 
mission house  as  surety  or  endorser,  provided  that  such  com- 
mission house  is  incorporated  in  this  commonwealth,  or  has  an 
established  place  of  business  and  a  partner  resident  therein; 
or   (3)   Of  an  association  or  corporation  at  least  one-half  of 
the  real  and  personal  property  of  which  is  located  within  the 
New  England  states,  provided  that  at  least  one  such  surety  or 
endorser  shall  be  a  citizen  of  or  corporation  incorporated  in 
this  commonwealth :  provided,  that  no  such  loan  shall  be  made 
or  renewed  unless  within  eighteen  months  next  preceding  the 
making  or  renewing  of  such  loan  an  examination  of  the  affairs, 
assets  and  liabilities  of  the  borrowing  corporation  or  associa- 
tion has  been  made,  at  the  expense  of  such  borrowing  cor- 
poration or  association,  by  an  accountant  approved  by  the 
commissioner.    The  report  of  such  examination  shall  be  made 
in  such  form  as  the  commissioner  may  prescribe.     A  copy  of 
the  report  certified  to  by  the  accountant  shall  be  delivered  by 
the  borrowing  corporation  or  association  to  the  savings  bank 


MASSACHUSETTS.  139 

before  such  loan  or  a  renewal  thereof  is  made,  and  a  copy  so 
certified  shall  be  delivered  by  the  accountant  to  the  commis- 
sioner within  thirty  days  after  the  completion  of  said  ex- 
amination. 

(c)  A  bond  or  note  of  a  gas,  electric  light,  telephone  or 
street  railway  corporation  incorporated  or  doing  business  in 
this  commonwealth  and  subject  to  the  control  and  supervision 
thereof;  provided,  that  the  net  earnings  of  said  corporation 
after  payment  of  all  operating  expenses,  taxes  and  interest, 
as  reported  to,   and  according  to   the  requirements  of,  the 
proper  authorities  of  the  commonwealth,  have  been  in  each  of 
the  three  fiscal  years  next  preceding  the  making  or  renewing 
of  such  loan  equal  to  not  less  than  four  per  cent  on  all  its 
capital  stock  outstanding  in  each  of  said  years ;  and  provided, 
that  the  gross  earnings  of  said  corporation  in  the  fiscal  year 
next  preceding  the  making  or  renewing  of  such  loan  have 
been  not  less  than  one  hundred  thousand  dollars. 

(d)  A  bond  or  note  issued,  assumed,  or  guaranteed  by 
endorsement  as  to  both  principal  and  interest,  by  a  railroad 
corporation  which  complies  with  all  the  requirements  of  sub- 
division (b),  or  of  subdivision  (e)  preceding  paragraph  (5) 
of  clause  Third:  provided,  that  the  principal  of  such  bond  or 
note  described  in  either  this  or  the  preceding  subdivision  is 
payable  at  a  time  not  exceeding  one  year  after  the  date  of 
investment  therein. 

(e)  A  note  of  a  responsible   borrower  in  such  form  as 
the    commissioner    may    approve,    with    a    pledge     as    col- 
lateral of: — 

(1)  One  or  more  first  mortgages  of  real  estate  situated 
in  this  commonwealth ;  provided,  that  the  amount  of  such 
note  is  not  in  excess  of  sixty  per  cent,  or  in  the  case  of  un- 
improved or  unproductive  real  estate  in  excess  of  forty  per 
cent,  of  the  value  of  the  property  or  properties  mortgaged; 
that  the  value  of  each  of  said  properties  has  been  certified  in 
accordance  with  the  provisions  of  clause  First;  and  that  the 
assignment  of  each  of  said  mortgages  has  been  recorded  in 
the  proper  registry  of  deeds. 


140  STATE   LAWS   AND   DECISIONS. 

(2)  Bonds  or  notes  authorized  for  investment  by  clauses 
Second,  Third,  Fourth,  Fifth  or  Sixth  at  no  more  than  ninety^ 
per  cent  of  the  market  value  thereof,  at  any  time  while  such 
note  is  held  by  such  corporation;  or 

(3)  Deposit  books  of  depositors  in  savings  banks  at  no 
more  than  ninety  per  cent  of  the  amount  of  deposits  shown 
therein;  or 

(4)  Shares    of   railroad    corporations    described    in    sub- 
divisions  (a),   (b)    or   (e)   of  clause  Third  at  no  more  than 
eighty  per  cent  of  the  market  value  thereof,  at  any  time  while 
such  note  is  held  by  such  corporation;  or 

(5)  Such  other  bonds,  notes  or  shares  of  corporations  or 
associations  and  at  such  percentages  of  their  market  values 
as  the  board  of  investment  shall  approve;  provided,  that  if 
the  commissioner  shall  disapprove  any  such  bonds,  notes  or 
shares,  he  shall  make  such  recommendations  in  writing  to  the 
board  of  investment  of  such  corporation  as  the  case  may  re- 
quire, and  shall  include  in  his  annual  report  a  statement  of 
the  facts  in  each  case  in  which  such  board  of  investment  has 
not  complied  with  his  recommendations  in  a  manner   satis- 
factory to  him. 

(f)  Whenever  used  in  this  clause,  the  word  "association" 
means  an  association  the  business  of  which  is  conducted  or 
transacted  by  trustees  under  a  written  instrument  or  declara- 
tion of  trust. 

Section  Fourteen,  added  by  the  laws  of  1913,  provides  that 
bonds  which  have  been  legal  investments  for  ten  successive 
years  under  the  provisions  of  subdivisions  (a),  (b),  (c)  or  (d), 
of  clause  Third,  Fifth  or  Sixth,  shall  not  be  rendered  illegal 
for  failure  of  the  corporation  to  comply  with  the  dividend 
requirements  for  two  years.  But  no  further  purchases  of  such 
bonds  shall  be  made  until  the  corporation  has  complied  with 
the  provisions  of  the  law. 

Investments    Outside   of    the    State. 

From  the  early  case  of  Harvard  College  v.  Amory,  26  Mass. 
446,  the  courts  of  Massachusetts  have  been  reasonable  in  approving 
investments  made  by  trustees  in  good  faith.  Corporate  stocks  and 
bonds  and,  in  especial  cases,  real  property  without  the  state  have  been 


MASSACHUSETTS. 

held  to  be  proper  investments.  But  an  investment  in  real  estate  out- 
side of  the  commonwealth  should  not  be  sustained  unless,  first,  the 
trust  funds  were  so  invested  when  they  came  into  the  custody  of  the 
trustees;  second,  where  the  will  authorizes  such  an  investment;  third, 
in  exceptional  cases  where  such  an  investment  may  be  necessary  to 
protect  or  secure  other  investments  involved  in  the  trust.  In  Amory 
v.  Green,  95  Mass.  413,  trustees  were  permitted  to  invest  in  a  home- 
stead in  another  state  for  the  benefit  of  the  cestui  que  trust,  because 
the  authority  given  in  the  will  was  broad  enough  to  justify  it.  And 
where  such  an  investment  constitutes  a  small  part  of  the  estate  and 
the  trustees  have  exercised  good  faith,  the  legality  of  the  investment 
will  be  upheld.  Thayer  v.  Dewey,  185  Mass.  68. 

Second  Mortgage. 

Investment  in  a  second  mortgage  may  not  be  inconsistent  with 
sound  discretion  on  the  part  of  trustees.  Taft  v.  Smith,  186  Mass.  31. 

Corporate   Stock. 

A  testator  devised  funds  to  trustees  to  invest  in  "safe  and  pro- 
ductive stock,  either  in  the  public  funds,  bank  shares  or  other  stock 
according  to  their  best  judgment  and  discretion."  The  trustees  re- 
tained certain  shares  of  bank  stock,  shares  in  an  insurance  company 
and  in  a  manufacturing  company.  The  court  decided  that  the  words 
used  in  the  will  were  broad  enough  to  give  the  trustees  authority  to 
make  such  an  investment.  Harvard  College  v.  Amory,  26  Mass.  446. 

A  trustee  invested  at  one  time  $3,573  in  Union  Pacific  stock  and 
later  $2,475.  This  amounted  to  more  than  one-third  of  the  estate. 
The  Union  Pacific  was  then  a  new  road.  The  second  investment  in 
such  stock  was  not  approved,  because  it  was  not  made  in  the  exercise 
of  sound  discretion.  Trustees  are  permitted  to  invest  portions  of  a 
trust  fund  in  stocks  of  private  business  corporations  when  the  cor- 
porations have  acquired,  by  reason  of  the  amount  of  their  property, 
and  the  prudent  management  of  their  affairs,  such  a  reputation  that 
cautious  persons  commonly  invest  in  such  securities.  Appeal  of  Dick- 
inson, 152  Mass.  184. 

Shares  of  stock  in  a  corporation  were  turned  over  to  trustees  in 
1870.  In  1881  the  stock  was  at  par,  but  from  that  time  on  it  de- 
preciated in  value  until  the  corporation  failed  in  1885.  Upon  these 
facts  the  court  refused  to  say  that  the  trustees,  who  were  men  of 
good  business  capacity,  lacked  sound  discretion  simply  because  their 
judgment  was  wrong.  Green  v.  Crapo,  181  Mass.  55. 

A  guardian  loaned  his  ward's  money  upon  an  individual  note 
secured  by  stock  at  the  rate  of  three-fourths  of  its  value.  There 
being  no  bad  faith,  the  investment  was  proper  for  a  guardian.  The 
English  rule  does  not  apply.  Lovell  v.  Minot,  37  Mass.  116. 


142  STATE   LAWS   AND   DECISIONS.   . 

Trust   Company   Stock. 

A  trustee  may  invest  the  funds  in  trust  company  stock.  Sheffield 
v.  Parker,  158  Mass.  330. 

Bonds. 

Where  trustees  sold  government  bonds  and  invested  in  bonds  of 
a  small  railroad  which  were  guaranteed  by  two  large  railroads,  they 
were  not  chargeable  with  mismanagement.  Green  v.  Crapo,  181 
Mass.  55. 

A  will  authorized  trustees  to  "use  their  own  judgment  as  to  in- 
vesting the  moneys,"  but  at  the  same  time  recommended  the  propriety 
of  keeping  at  least  half  of  the  estate  invested  in  mortgages  on  un- 
encumbered realty.  The  trustees  sold  United  States  bonds  and  invested 
practically  all  of  the  funds  in  railroad  bonds  which  depreciated  in 
value.  Since  the  will  gave  the  trustees  wide  discretion  and  since 
they  had  acted  in  good  faith,  they  were  not  chargeable  with  the  loss. 
Brown  v.  French,  125  Mass.  410. 

Percentage  of  Fund  Which  May  Be  Invested  in  Fluctuating  Securities. 

Where  the  trust  estate  amounted  to  $30,000,  and  the  trustees  in- 
vested at  one  time  $6,500  in  the  stocks  and  bonds  of  a  railroad  com- 
pany, and  at  another,  over  $5,000,  the  court  decided  that  the  second 
investment  was  improperly  made,  because  the  first  investment  in  such 
securities  represented  about  one-quarter  of  the  estate.  Davis,  Appellant, 
183  Mass.  499. 

In  the  appeal  of  Dickinson,  152  Mass.  184,  evidence  was  given  to 
show  that  conservative  trustees  did  not  invest  more  than  one-third 
of  a  trust  fund  in  fluctuating  securities,  including  all  kinds  of  stocks, 
and  did  not  place  more  than  five  per  cent  of  the  money  in  one  class 
of  such  securities. 

But  in  Brown  v.  French,  125  Mass."  410,  where  a  trustee  invested 
practically  all  of  the  estate  in  railroad  bonds,  no  mention  was  made 
of  the  fact.  Apparently  the  right  of  trustees  to  use  their  own  judg- 
ment in  good  faith  absolved  them  from  the  rule  requiring  only  a  por- 
tion of  the  money  to  be  invested  in  fluctuating  securities. 

Retaining  Investments  Made   by  Testator. 

If  a  testator  has  invested  funds  to  remain  permanently  in  stock, 
that  fact  may  well  be  considered  by  the  trustee  when  called  upon  to 
•exercise  his  best  judgment  and  discretion.  This  may  always  be  con- 
sidered as  tending  to  the  discharge  of  the  trustee.  Harvard  College  v. 
Amory,  26  Mass.  446. 

Stock  of  a  railroad  which  was  depreciating  in  value  came  into  the 
hands  of  a  trustee.  He  continued  the  investment  in  good  faith,  think- 
ing it  would  be  a  sacrifice  to  sell.  There  was  no  liability  for  the 
loss.  Bowker  v.  Pierce,  130  Mass.  262. 


MASSACHUSETTS.  143 

Manufacturing   Business. 

A  trustee  invested  funds  in  machinery,  fixtures  and  patent  rights 
of  a  manufacturing  concern.  This  amounts  to  a  misappropriation  of 
funds  and  makes  all  persons  who  knowingly  engage  in  it  accountable 
as  trustees.  Trull  v.  Trull,  95  Mass.  407. 

Purchasing   His   Own   Mortgage. 

A  trustee  purchased  from  himself  with  the  trust  funds  a  mort- 
gage upon  property  which,  at  the  time,  was  worth  less  than  the  fund. 
Such  an  investment  was  improper  and  the  trustee  was  liable.  Appeal 
of  Nichols,  157  Mass.  20.  See  also  McKim  v.  Glover,  161  Mass.  418. 

Must  Appropriate  the  Investment  to  the   Trust. 

When  an  investment  is  made,  the  trustee  must,  by  act,  appro- 
priate it  to  the  trust.  He  cannot  purchase  and  retain  in  a  doubtful 
capacity.  Sheffield  v.  Parker,  158  Mass.  330. 

Time    of   Judgment  as   to   Value. 

The  question  of  the  lawfulness  and  fitness  of  an  investment  must 
be  determined  as  of  the  time  when  it  is  made,  and  not  by  subse- 
quent facts  which  could  not  have  been  anticipated.  Brown  v.  French, 
125  Mass.  410. 

Purchasing  Half  of  Property  When  Estate  Owns  the  Other  Half. 

Where  the  trust  estate  owns  an  undivided  half  interest  in  prop- 
erty and  the  property  is  to  be  sold  at  a  sacrifice,  it  is  the  duty 
of  the  trustee,  if  he  has  money  of  the  estate  for  investment  and 
can  buy  at  a  low  price,  to  purchase  the  property  and  thus  protect  the 
estate.  Pine  v.  White,  175  Mass.  585. 

Effect  of  Words  Giving  Full  Power  to  Invest. 

The  words  "with  full  power  to  make  purchases,  investments  and 
exchanges  in  such  manner  as  to  them  shall  seem  expedient;  it  being 
my  intention  to  give  my  said  trustees  the  same  dominion  and  control 
over  said  trust  property  as  I  now  have"  are  enabling  words,  giving  the 
trustees  full  power  to  deal  with  the  estate,  but  they  do  not  release 
the  trustees  from  the  duty  to  exercise  sound  judgment  and  discretion 
in  selecting  investments.  Davis,  Appellant,  183  Mass.  499. 

If  instructions  regarding  investments  in  certain  securities  are  con- 
tained in  the  trust  instrument,  they  must  be  followed  explicitly.  City 
Missionary  Soc.  v.  Memorial  Church,  186  Mass.  531. 

Purchase    of   Certificate   of    Deposit. 

A  trustee  who  purchases  a  certificate  of  deposit,  issued  by  a  na- 
tional bank  in  good  standing,  is  not  liable  for  loss  due  to  failure  of 
the  bank  before  the  certificate  is  due.  Hunt,  Appellant,  141  Mass.  515. 


144  STATE   LAWS   AND   DECISIONS. 

Consent  of  Widow  to  Investment  Not  Waived  by  Waiver  of  Her  Per- 
sonal  Rights  Under  Will. 
Where  a  widow  renounces  her  rights  under  a  will  and  takes  under 

law,  her  waiver    does   not   abrogate    a   clause   which   provides   that   no 

change  in  investments  shall  be  made  without  her  consent.     Plympton  v. 

Plympton,    88    Mass.    178. 

Improvements   and   Eepairs. 

The  general  rule  is  that  repairs  must  be  made  out  of  income,  and 
substantial  improvements  out  of  capital.  When  repairs  and  substan- 
tial improvements  are  so  closely  related  as  to  be  inseparable,  the 
expense  should  be  apportioned  by  the  trustee  according  to  his  best 
judgment.  Little  v.  Little,  161  Mass.  188. 

The  expense  of  putting  property  in  condition  to  be  leased  may 
be  considered  a  part  of  the  original  purchase  price,  while  the  expense 
of  keeping  it  in  repair  would  in  general  be  chargeable  to  income. 
Parsons  v.  Winslow,  16  Mass.  361. 

Where  rents  are  increased  as  a  result  of  repairs  and  the  beneficiary 
reaps  the  benefit,  the  trustee  should  be  allowed  the  expense  of  making 
the  repairs.  Eathbun  v.  Colton,  32  Mass.  471;  Eoot  v.  Yeomans,  32 
Mass.  488. 

Where  the  trustee  has  full  power  to  invest,  reinvest  and  change 
any  and  all  property  of  the  estate,  he  may  repair  the  property  in 
such  a  manner  as  to  increase  the  value  of  the  estate.  Sohier  v.  Eld- 
redge,  103  Mass.  345. 

A  trustee  is  justified  in  tearing  down  an  old  building  and  erect- 
ing a  new  one  where  a  prudent  business  man  would  do  so  to  secure  a 
fair  income,  having  regard  to  the  amount  which  such  investment  would 
bear  in  relation  to  the  trust  fund  as  a  whole.  But  unless  the  trust 
instrument  exempts  the  trustee  from  liability,  an  investment  in  such  a 
manner  of  $850,000,  out  of  an  estate  of  $920,000,  is  too  large  a  pro- 
portion. Warren  v.  Pazolt,  203  Mass.  329. 

Where  a  trustee  having  wide  discretion  makes  extensive  repairs 
of  a  large  estate  for  the  purpose  of  keeping  the  income  at  a  fixed 
standard  the  expenses  should  be  allowed  out  of  the  income.  Jordan  v. 
Jordan,  192  Mass.  337. 

Guardians. 

With  reference  to  guardians  the  laws  provide  that  the  court  may 
make  such  order  for  the  management  and  investment  of  the  estate  as 
the  case  may  require.  Eevised  Laws,  1902,  Guardianship,  Sec.  35. 

Another  section  of  the  statutes  provides  for  a  sale  of  the  ward's 
property  and  investment  by  the  guardian  "according  to  his  best  judg- 
ment." Eevised  Laws,  Vol.  2,  p.  1319. 

It  would  seem,  therefore,  that  a  guardian  may  follow  the  general 
rules  governing  trustees  in  the  investment  of  trust  funds. 


MICHIGAN. 

TRUST     COMPANIES. 

Howell's    Statutes,    1913. 

Part  of  Section  6486,  Relating  to  Trust  Companies. — And 
such  board  of  directors  may  invest  or  loan  the  balance  of 
its  capital  stock  and  other  moneys  received  by  such  corpora- 
tion in  trust,  in  bonds  secured  by  mortgages,  or  notes  and 
mortgages  on  unencumbered  real  estate  within  the  State  of 
Michigan,  worth  double  the  amount  secured  thereby,  or  in 
public  stocks  and  bonds  of  the  United  States,  or  any  state 
of  the  United  States  that  has  not  defaulted  on  its  principal 
or  interest  within  ten  years;  or  of  any  organized  county  or 
township,  or  incorporated  city  or  village,  or  school  district 
in  this  state,  or  in  any  other  such  state,  duly  authorized  to 
be  issued,  or  in  such  real  or  personal  securities  as  they  may 
deem  proper. 

TRUSTEES    GENERALLY.* 

Sec.  12139.  Whenever  it  shall  become  necessary  or  con- 
venient in  the  settlement  or  distribution  of  the  estate  of  a  de- 
ceased person,  to  appo'int  a  trustee  to  take  charge  of  or  invest 
and  distribute  any  portion  of  such  estate,  the  judge  of  probate 
shall  have  power,  and  it  shall  be  his  duty,  on  the  application 
of  any  person  interested  in  the  estate,  to  appoint  such  trustee. 

Sec.  12142.  It  shall  be  the  duty  of  such  trustee  to  invest 
or  distribute  the  estate  which  shall  be  received  by  him,  ac- 
cording to  the  direction  of  his  warrant  of  appointment,  and 
to  account  for  such  estate  and  the  interest  thereon,  in  such 
manner  and  at  such  times  as  the  judge  of  probate  shall  order. 

Guardians. — Section  11578  provides  for  the  sale  or  transfer 
of  property  of  the  ward,  under  supervision  of  the  judges  of 
probate,  with  the  right  to  invest  the  proceeds  of  such  sale,  to- 

145 


146  STATE    LAWS    AND   DECISIONS. 

gether  with  any  other  money,  in  real  estate  or  in  any  other 
manner  that  shall  be  for  the  best  interest  of  all  concerned. 

Sec.  12068,  Relating  to  the  Sale  of  Property  by  Executors. — 
The  court  shall  make  all  proper  orders  and  directions  from 
time  to  time  for  the  management,  investment  and  disposition 
of  the  moneys  received  from  such  sale,  and  the  interest  and 
income  therefrom. 

Trust  to  Carry  on  Business. 

Where  a  trust  is  created  for  the  purpose  of  carrying  on  a  busi- 
ness for  the  benefit  of  creditors,  the  trustee  should  not  assume  ex- 
traordinary risks  or  depart  radically  from  the  provisions  of  the  trust 
instrument.  Enlarging  the  business  and  creating  obligations  not  neces- 
sary for  the  business  constitute  a  breach  of  duty.  Loud  v.  Winchester, 
52  Mich.  174;  64  Mich.  23. 

Neglect  to  Invest. 

Where  a  trustee  has  misappropriated  a  fund  or  neglected  to  invest 
it,  the  beneficiary  will  be  presumed  to  have  lost  at  least  the  lawful 
interest.  Perrin  v.  Lepper,  72  Mich.  454. 

Duty  in  General. 

It  is  the  duty  of  a  trustee  to  work  for  the  best  interests  of  the 
estate,  and  to  keep,  manage  and  invest  the  property  in  such  a  manner 
that  it  can  be  turned  over  to  beneficiaries  within  a  reasonable  time, 
free  from  any  complications  with  his  own  property.  Perrin  v.  Lepper, 
72  Mich.  454. 

Care  Required. 

The  law  requires  trustees  to  exercise  sound  discretion  and  good 
faith  in  the  investment  of  funds.  Caspari  v.  Cutcheon,  110  Mich.  86. 

When  Chargeable  With  Interest. 

Trustees  are  chargeable  with  interest  only  when  they  have  re- 
ceived interest,  or  have  used  the  money  or  have  been  negligent  in 
paying  over  or  have  failed  to  invest.  Calkins  v.  Bump,  120  Mich.  335. 

Purchase  by  Beneficiaries  From  Trustee. 

Where  intelligent  beneficiaries  of  mature  years  and  fully  informed 
of  all  the  circumstances  authorize  the  trustee  to  use  trust  money  in 
the  purchase  of  property  which  he  owns,  they  cannot  later  claim  that 
the  transaction  was  invalid.  Skelding  v.  Dean,  141  Mich.  143. 


MICHIGAN.  147 

Mingling  Funds. 

Where  a  trust  company  holding  money  received  from  the  sale  of 
bonds  in  trust  mingles  it  with  general  funds  which  it  loans  at  in- 
terest it  is  liable  for  the  legal  rate  of  interest.  Union  Trust  Co.  v. 
Preston  Nat.  Bank,  144  Mich.  106. 

Corporate   Stock. 

A  devise  by  a  testator  of  "five  thousand  dollars  in  cash  arising 
from  my  property,  such  as  windmill  stock  or  any  other  source,"  to  be 
held  and  controlled  by  F,  trustee,  and  providing  for  payment  of  a 
specified  yearly  amount  whether  arising  from  dividends  or  interest, 
does  not  give  the  trustee,  who  received  the  money  in  cash,  power  to 
purchase  stock  from  another  son  at  excessive  value.  Cropsey  v. 
Johnston,  137  Mich.  16. 

Unsecured   Notes. 

In  one  respect  the  decisions  are  reasonably  uniform.  It  is  a  gen- 
erally accepted  rule  that  it  is  not  prudent  to  invest  trust  funds  in  un- 
secured notes  of  an  individual  or  of  a  partnership.  Mich.  Home  Miss. 
Society  v.  Corning,  164  Mich.  395. 

Guardian. 

Public  securities  have  always  been  held  lawful.  A  guardian  can- 
not be  censured  for  investing  in  these  or  in  any  legal  interest,  when 
it  is  the  best  which  he  finds  readily  obtainable.  In  the  absence  of 
contract  he  cannot  be  held  for  neglect  beyond  seven  per  cent,  the 
legal  rate.  Gott  v.  Gulp,  45  Mich.  265. 

Personal  Benefit,   Bate   of  Interest. 

A  guardian  may  not  reap  any  personal  benefit  from  the  manage- 
ment of  the  estate.  When  he  neglects  to  keep  funds  separate  from 
his  own,  he  is  chargeable  with  simple  interest.  When  he  is  guilty 
of  fraud  or  gross  misconduct,  he  may  be  charged  with  annual  or  semi- 
annual rests.  Moyer  v.  Fletcher,  56  Mich.  508. 

Deposit  in  Savings  Bank. 

The  length  of  time  that  a  trustee  should  allow  a  fund  to  remain 
in  a  bank  depends  upon  circumstances  and  the  opportunity  to  invest. 
A  guardian  who  permits  money  to  remain  in  a  savings  bank  at  four 
per  cent  for  over  six  months  cannot  for  that  reason  be  said  to  be 
negligent.  In  re  Grammel's  Estate,  120  Mich.  487. 

Purchasing  a  Business. 

When  a  trustee,  with  the  consent  of  the  beneficiary  who  is  twenty 
years  of  age,  purchases  a  business  with  trust  funds  and  the  beneficiary 


148  STATE   LAWS   AND   DECISIONS. 

continues  to  run  the  business  for  two  years  after  she  becomes  of  age, 
she  ratifies  the  act  of  the  trustee.    In  re  Shailer  Estate,  172  Mich.  600. 

Continuing  Business. 

The  law  requires  that  an  administrator  shall  take  charge  of  all 
the  personal  estate,  collect  and  convert  it  into  money  ready  for  dis- 
tribution. He  is  required  to  exercise  ordinary  skill  and  prudence. 
Loomis  v.  Armstrong,  63  Mich.  355. 

It  follows  that  a  trustee  may  not  continue  the  testator's  business 
unless  authorized  so  to  do.  Frey  v.  Eisenhardt,  116  Mich.  160. 

Even  where  they  are  expressly  authorized  to  carry  on  a  business, 
the  trustees  must  follow  strictly  the  provisions  of  the  instrument. 
Packard  v.  Kingman,  109  Mich.  497. 


MINNESOTA. 

TRUST    COMPANIES. 

General    Statutes,    1913. 

Sec.  6412.  Trust  Company. — It  may  invest  all  moneys  re- 
ceived by  it  in  trust  in  authorized  securities  and  shall  be  re- 
sponsible to  the  owner  or  cestui  que  trust  for  the  validity,  reg- 
ularity, quality,  value,  and  genuineness  of  such  investment  and 
securities  so  made,  and  for  the  safe  keeping  of  the  securities 
and  evidences  thereof.  Whenever  special  directions  are  given 
in  any  order,  judgment,  decree  or  will,  or  any  other  written  in- 
strument as  to  the  particular  manner  or  particular  class  or  kind 
of  securities  or  property  in  which  any  investment  shall  be 
made,  it  shall  follow  such  directions,  and  in  such  case  it  shall 
not  be  further  responsible  by  reason  of  the  performance  of  such 
trust.  In  all  "other  cases  it  may  invest  the  same  in  any  of  said 
other  securities,  using  its  best  judgment  in  the  selection 
thereof,  and  shall  be  responsible  for  the  validity,  regularity, 
quality  and  value  thereof  at  the  time  made,  and  for  their 
safe  keeping.  It  may,  in  its  discretion,  retain  and  continue 
any  investment  and  security  or  securities  coming  into  it& 
possession  in  any  fiduciary  capacity. 

Sec.  6415.  Trust  Funds,  Investments  of  Accumulations. — 
Any  amount  not  less  than  one  hundred  dollars,  received  by  it 
as  executor,  administrator,  or  guardian,  or  other  trustee,  or 
by  order  of  court,  not  required  for  the  purposes  of  such  trust, 
or  not  to  be  accounted  for  within  one  year,  it  shall  invest  as 
soon  as  practicable  in  authorized  securities  either  then  held 
by  it  or  specially  procured  by  it;  and  the  income,  less  its 
proper  charges,  shall  become  part  of  the  trust  estate,  and  the 
net  accumulations  thereof  shall  be  likewise  invested,  ac- 
counted for,  and  allowed  in  settlement  of  such  trust. 

Sec.  6393.  Authorized  Securities. — The  trustees  of  any 

149 


150  STATE   LAWS   AND   DECISIONS. 

savings  bank  shall  invest  the  moneys  deposited  therein  only 
as  follows : 

1.  In  the  bonds  or  other  interest-bearing  obligations  of 
the  United  States,  or  in  securities  for  the  payment  of  which 
and  interest  thereon  the  faith  of  the  government  is  pledged. 

2.  In  the  bonds  of  any  state  which  has  not  defaulted  in 
payment  of  any  bonded  debt  within  ten  years  prior  to  the 
making  of  such  investment. 

3.  In  the  bonds  of  any  county,  city,  town,  village,  school, 
drainage,  or  other  district  created  pursuant  to  law  for  public 
purposes  in  Minnesota,  or  in  any  warrant,  order,  or  interest- 
bearing  obligation  issued  by  this  state,  or  by  any  city,  city 
board,  town,  or  county  therein,  provided  that  the  net  indebted- 
ness of  any  such  municipality  or  district,  as  net  indebtedness 
is  denned  by  Revised  Laws  1905,  Sec.  777,  and  its  amend- 
ments, shall  not  exceed  ten  per  cent  of  its  assessed  valuation, 
or  in  the  bonds  of  any  county,  city,  town,    village,    school, 
drainage,  or  other  district  created  pursuant  to  law  for  public 
purposes  in  Iowa,  Wisconsin  and  North  and  South  Dakota,  or 
in  the  bonds  of  any  city,  county,  town,  village,  school  district, 
drainage,  or  other  district,  created  pursuant  to  law  for  public 
purposes,  in  the  United  States  containing  at  least  thirty-five 
hundred  inhabitants;  provided,  that  the  total  bonded  indebt- 
edness of  any  such  municipality  or  district  shall  not  exceed 
ten  per  cent  of  its  assessed  valuation. 

4.  In  notes  or  bonds  secured  by  mortgages  on  unencum- 
bered real  estate  in  Minnesota,  Wisconsin,  Iowa,  North  Da- 
kota, South  Dakota  and  Montana,  worth  when  improved  at 
least  twice,  and  when  unimproved  at  least  three  times  the 
amount  loaned  thereon.     But  not  more  than  seventy  per  cent 
of  the  whole  amount  of  the  moneys  of  the  bank  shall  be  so 
loaned,  and  such  investments  shall  be  made  only  on  report 
of  a  committee  directed  to  investigate  the  same  and  report  its 
value,  according  to  the  judgment  of  its  members,  and  its  re- 
port shall  be  preserved  among  the  bank's  records. 

5.  In  notes  secured  by  such  bonds  or  mortgages  as  the 
bank  under  this  section  is  authorized  to  invest  in,  but  no  such 
bond  or  mortgage  shall  be  taken  as  collateral   security  for 


MINNESOTA.  151 

more  than  its  par  value,  nor  shall  the  aggregate  amount  of 
securities  taken  be  less  than  the  full  amount  loaned  thereon, 
and  no  such  loan  shall  be  made  for  a  longer  time  than  one 
year,  nor  to  a  greater  amount  to  any  one  person  than  three 
per  cent  of  the  total  deposits  of  the  bank.  No  such  bank  shall 
loan  in  the  aggregate,  on  the  security  specified  in  this  para- 
graph, more  than  one-fourth  of  its  deposits. 

6.  In  the  bonds  of  any  railroad  company,  or  the  successor 
of  any  railroad  company,  which  has  received  a  land  grant 
from  the  government,  and  whose  bonds  are  secured  by  a  first 
lien  upon  its  railroad. 

7.  In  the  bonds  of  any  other  railroad  company  which  are 
secured  by  first  lien  upon  a  railroad  within  the  United  States, 
or  in  the  mortgage  bonds  of  any  such  company,  of  an  issue 
to  retire  all  prior  mortgage  indebtedness  thereof,  or  in  the 
bonds  of  any  railroad  company  in  the  United  States  which  are 
guaranteed  or  assumed  by  another  railroad  company  within 
the  United  States:  Provided,  that  the  railroad  company,  ex- 
cept one  whose  bonds  are  so  guaranteed  or  assumed,  either 
issuing,  guaranteeing  or  assuming  any  of  such  bonds,  has  not 
within  five  years  prior  to  such  investment  failed  in  the  pay- 
ment of  a  dividend  upon  its  entire  capital  stock  outstanding 
of  not  less  than  four  per  cent  per  annum  each  fiscal  year,  and 
has  not  within  such  time  defaulted  in  the  payment  of  any 
part  of  the  principal  or  interest  of  any  debt  incurred  by  it 
and  secured  by  trust  deed  or  mortgage  upon  its  road  or  any 
part  thereof,  or  in  the  payment  of  any  part  of  the  principal 
or  interest  of  any  bonds  guaranteed  or  assumed  by  it.     But 
no  such  bank  shall  loan  upon  or  invest  in  railroad  bonds  to 
an  amount  exceeding  in  the  aggregate  twenty  per  cent  of  its 
deposits,  nor  exceeding  five  per   cent  of  its  deposits  in  the 
bonds  issued,  guaranteed  or  assumed  by  any  one  railroad  com- 
pany. 

8.  In  the  debenture  stock  of  any  railroad  company  own- 
ing and  operating  a  line  of  road  in  whole  or  in  part  within  the 
state,  provided  that  such  stock  shall  bear  interest  at  the  rate 
of  at  least  four  per  cent  per  annum,  and  shall  be  secured 
by  trust  deed  as  a  first  lien  upon  such  line  of  railway,  and 


152  STATE   LAWS   AND   DECISIONS. 

that  not  more  than  five  per  cent  of  its  deposits  shall  be  in- 
vested in  such  stock. 

The  term  "authorized  securities,"  whenever  used  in  the 
Revised  Laws,  shall  be  understood  as  referring  to  the  se- 
curities specified  in  this  section. 

Transfer  by  Trust  Company  of  Its  Own  Mortgages. 

The  statutes  authorizing  trust  companies  to  invest  in  certain  se- 
curities do  not  abrogate  the  rule  that  a  trustee  may  not  deal  with 
himself.  Therefore,  such  companies  may  not  transfer  their  own  mort- 
gages to  themselves  as  trustees,  even  if  such  mortgages  are  legal  in- 
vestments. St.  Paul  Trust  Co.  v.  Strong,  85  Minn.  1.  But  in  1903,  sec- 
tion 6415  of  the  Statutes  (supra)  was  passed  permitting  a  trust  company 
to  invest  in  securities  "held  by  it — or  specially  procured  by  it." 

Interest   Chargeable  When   Trustee   Mingles  Funds. 

In  the  absence  of  fraud  or  flagrant  breach  of  trust,  simple  interest 
only  is  chargeable  against  a  trustee  when  he  mingles  the  funds  with 
his  own  or  uses  them  in  his  private  business.  St.  Paul  Trust  Co.  v. 
Strong,  85  Minn.  1;  St.  Paul  Trust  Co.  v.  Kittson,  62  Minn.  408. 

But  a  trustee  is  not  to  pay  interest  solely  because  he  has  deposited 
trust  funds  with  his  own  or  used  them  in  his  business.  There  must 
be  in  addition  a  breach  of  trust.  The  rule  is  discussed  in  re  Shotwell, 
49  Minn.  170. 

Trustee  May  Not  Acquire  Property  for  His  Own  Benefit. 

A  trustee  is  utterly  disabled  from  acquiring  property  for  his  own 
benefit,  and  it  makes  no  difference  whether  there  is  fraud  in  the 
transaction  or  not.  Gilbert  v.  Hewetson,  79  Minn.  326. 

Certificates  of  Deposit. 

Investments  by  a  trust  company  in  certificates  of  deposit  issued 
by  city  banks  and  paying  four  per  cent  interest  have  been  upheld,  but 
the  company  may  not  invest  in  its  own  certificates  of  deposit.  St. 
Paul  Trust  Co.  v.  Kittson,  62  Minn.  408. 

Neglect   to    Invest. 

A  guardian  who  neglects  to  invest  the  funds  of  his  ward  is  charge- 
able with  interest  at  the  legal  rate  after  a  reasonable  time  (six 
months).  Crosby  v.  Merriam,  31  Minn.  342. 


MISSISSIPPI. 

GUARDIANS. 

Code    of    1906. 
(With   Amendments   to   1914.) 

Sec.  2416.  "Whenever  the  guardian  shall  have  money  of 
his  ward  not  needed  for  current  expenditures,  or  directed  to 
be  invested  for  the  ward,  he  shall  apply  to  the  court,  or  chan- 
cellor in  vacation,  for  directions  as  to  the  disposition  he  shall 
make  of  it;  and  the  court  or  chancellor  shall  determine 
whether  he  shall  lend  it  at  interest,  and  upon  what  security, 
or  how  he  shall  dispose  of  it;  and  if  the  court  or  chancellor 
designated  the  person  to  whom  the  loan  shall  be  made,  or 
the  security  on  which  it  shall  be  made,  and  the  loan  be  so 
made,  responsibility  shall  not  attach  thereafter  to  the  guar- 
dian; but  if  the  court  or  chancellor  shall  intrust  him  with 
discretion  in  the  matter,  he  shall  be  bound  for  the  exercise  of 
sound  judgment;  and  the  court  or  chancellor  may  direct  an 
investment  in  the  bonds  of  the  state  or  of  any  county  or 
municipality  thereof,  or  of  a  levee  board,  or  of  the  United 
States.  Any  guardian  who  fails  to  report  to  the  court  the 
fact  that  he  has  money  of  his  ward  not  needed  or  allowed 
to  be  used  for  current  expenditures,  and  to  ask  the  order  of 
the  court  as  to  the  disposition  of  such  money,  shall  be  charge- 
able with  interest  on  the  same,  at  the  rate  of  ten  per  centum 
per  annum  during  the  time  of  failure. 

Sees.  2419  and  2420  provide  that  the  guardian  may  im- 
prove the  land  of  the  ward  and  change  investments  with  the 
approval  of  the  court  of  chancery. 

Reasonable   Diligence   Required. 

Trustees  are  required  to  use  reasonable  care  and  diligence  in  the 
management  of  the  estate.  If  they  mingle  trust  funds  with  their 
own  they  are  chargeable  with  the  loss.  Coffin  v.  Bramlitt,  42  Miss.  194. 

153 


154  STATE   LAWS   AND   DECISIONS. 

Order  of  Probate  Court. 

If  a  guardian  loans  his  ward's  money  without  an  order  of  the 
probate  court,  he  does  so  at  his  own  risk.  Coffin  v.  Bramlitt,  42 
Miss.  194. 

Duty  to  Invest. 

If  a  trustee  does  not  loan  money  he  is  chargeable  with  interest  at 
ten  per  cent.  Code  of  1906,  section  2416.  This  provision  of  the  code 
seems  to  have  been  added  to  meet  the  rule  in  the  earlier  decisions 
and  especially  in  Eeynolds  v.  Walker,  29  Miss.  250,  in  which  it  was 
decided  that  a  guardian  is  not  liable  for  interest  unless  he  has  been 
directed  by  the  probate  court  to  invest,  or  has  invested,  or  has  used 
the  funds  in  his  business.  The  effect  of  the  statute  is  to  require  invest- 
ment under  a  court  order. 

Liability  for  Compound  Interest. 

Trustees  are  not  liable  for  compound  interest  unless  they  have 
been  guilty  of  fraud  or  have  secretly  made  large  profits  in  the  use 
of  the  fund,  or  have  mingled  it  with  their  own.  Crump  v.  Gerock,  40 
Miss.  765. 

The  beneficiary  may  elect  to  take  the  profits  or  the  principal  with 
compound  interest.  Troup  v.  Rice,  55  Miss.  278. 

Stocks. 

Where  an  executor  retained  railroad  stocks  under  an  honest  mis- 
take of  judgment  he  is  not  liable  for  loss.  Troup  v.  Eice,  55  Miss.  278. 

May  Not  Acquire  Interest  in  the  Estate. 

A  trustee  may  not  acquire  directly  or  indirectly  any  personal  in- 
terest in  the  estate.  Joor  v.  Williams,  38  Miss.  546;  Scott  v.  Freeland, 
7  S.  &  M.  409. 

One  Year   Allowed   Administrator. 

One  year  is  allowed  an  administrator  to  collect  the  estate  and 
make  distribution.  After  one  year  'he  is  chargeable  with  interest.  If 
he  makes  any  profit  during  the  year  he  must  account  for  it.  Anderson 
v.  Gregg,  44  Miss.  170. 


MISSOURI. 

TRUST    COMPANIES. 

Statutes    of    1909. 
(With   Amendments   to   1914.) 

Sec.  1132.  Investments. — The  directors  of  corporations 
created'  under  this  article  shall  have  power  of  investing  the 
moneys  placed  in  their  charge  in  loans  secured  by  real  estate 
or  other  sufficient  collateral  security,  in  public  bonds  of  the 
United  States,  or  of  this  state,  or  in  the  bonds  or  stocks  of  any 
incorporated  city  or  county  in  this  state.  Such  corporations 
shall  own  only  such  real  estate  as  may  be  required  for  the 
transaction  of  their  business,  and  such  as  they  may  require  in 
the  enforcement  and  collection  of  debts  or  liabilities  due  to 
them. 

Sec.  111.  Executors  and  Administrators — Order  of  Court. 
— If,  on  the  return  of  the  inventory,  or  at  any  other  time,  it 
shall  appear  to  the  satisfaction  of  the  court  that  there  is  a 
surplus  of  money  in  the  hands  of  the  executor  or  adminis- 
trator that  will  not  shortly  be  required  for  the  expenses  of 
administration,  or  payment  of  debts,  it  shall  have  discretion- 
ary power  to  order  him  to  lend  out  the  money  on  such  terms 
and  for  such  time  as  may  be  deemed  best. 

Order   of   Court. 

If  an  administrator  loans  funds  of  the  estate  without  an  order  of 
court,  he  and  his  sureties  are  liable  for  all  losses  growing  out  of  such 
loan.  Garesche  v.  Priest,  9  A.  270;  affirmed,  78  Mo.  126. 

When  Chargeable  With  Interest. 

Interest  may  not  be  compounded  for  a  simple  breach  of  trust. 
Cruce  v.  Cruce,  81  Mo.  684.  But  when  the  trustee  has  speculated 
with  the  funds  and  the  profit  cannot  be  ascertained,  or  where  he  has 
used  the  money  for  his  own  purposes,  the  highest  rate  of  interest  may 
be  charged.  Bobb  v.  Bobb,  89  Mo.  421;  In  re  Davis,  62  Mo.  454. 

155 


156  STATE   LAWS   AND   DECISIONS. 

And  where  he  mingles  the  funds  with  his  own  he  is  chargeable 
with  interest  although  he  has  made  none.  Bates  v.  Hamilton,  144  Mo.  !;• 
In  re  Murdock,  129  Mo.  499. 

Must  Comply  Strictly  With  Provisions  of   Trust. 

Where  a  trustee  is  directed  to  invest  money  in  lands,  he  is  not 
warranted  in  investing  part  as  directed  and  expending  the  remainder 
in  improving  the  land.  Gates  v.  Hunter,  13  Mo.  511. 

Donation  to  Induce  Improvement  of  Surrounding  Property. 

Where  a  testator  created  a  reserve  fund  to  guard  against  loss,  and 
authorized  the  trustees  to  invest  and  reinvest,  it  was  proper  for  them 
to  make  a  donation  to  a  corporation  preparing  to  erect  a  hotel  near 
the  property  which  would  be  of  benefit  to  the  estate.  Drake  v.  Crane, 
127  Mo.  85. 

Guardian. 

The  power  of  a  guardian  to  sell  property  of  a  ward  and  invest  the 
proceeds  must  be  obtained  by  an  order  of  the  probate  court.  Woods  v. 
Boots,  60  Mo.  546. 

The  statutes  do  not  require  a  guardian  to  invest  in  government 
securities,  nor  until  1865  did  they  require  an  investment  in  real  estate 
securities.  Taylor  v.  Hite,  61  Mo.  142.  It  seems  that  a  guardian,  under 
an  order  of  court,  may  invest  in  public  securities  or  upon  real  estate 
security  at  least  double  in  value  the  amount  loaned.  Statutes  of  1906, 
sections  3510,  3513,  3517. 

Care  Required. 

A  trustee  must  employ  such  diligence  and  prudence  in  the  invest- 
ment of  funds  as  men  of  discretion  and  intelligence  exercise  in  the  man- 
agement of  their  own  affairs.  Taylor  v.  Hite,  61  Mo.  142. 

May  Not  Change  Character  of  Property  Unless  it  is  Perishable. 

Trustees  have  no  power  to  change  the  character  of  trust  property 
unless  it  is;  of  a  perishable  nature.  In  such  a  case  it  must  be  con- 
verted into  a  permanent  investment.  Garesche  v.  Levering  Inv.  Co.,  146 
Mo.  436;  Gamble  v.  Gibson,  59  Mo.  595. 

May  Not  Incorporate  the  Estate. 

The  power  to  sell  and  reinvest  does  not  give  trustees  the  right  to 
convert  the  estate  into  a  corporation.  Garesche  v.  Levering  Inv.  Co., 
146  Mo.  436. 

Depreciation  of  Securities. 

A  trustee  who  has  invested  in  sufficient  security  is  not  responsible 
for  later  depreciation.  State  v.  Slevin,  93  Mo.  253. 


MONTANA. 

TRUST   COMPANIES. 

Statutes    of    1907. 
(With  Amendments  to   1914.) 

Sec.  3930.  The  board  of  directors  of  any  such  corpora- 
tion are  hereby  authorized  to  invest  the  capital  of  said  cor- 
poration, and  keep  the  same  invested,  in  good  securities,  and  it 
is  lawful  for  said  corporation  to  make  such  investments  of  its 
capital,  and  the  funds  accumulated  by  its  business,  including 
money  deposits,  or  any  part  thereof,  in  notes  or  bonds  and 
mortgages  on  unencumbered  real  estate,  within  the  state  of 
Montana,  and  also  on  any  and  all  stocks  or  bonds  of  this 
state,  or  any  other  state  or  territory  of  the  United  States,  or 
the  bonds  of  any  county,  city,  town,  or  school  district,  of  this 
state,  legally  authorized  to  issue  such  bonds. 

TRUSTEES. 

Sec.  5396.  Investment  of  Money  by  Trustee. — A  trustee 
must  invest  money  received  by  him  under  the  trust,  as  fast  as 
he  collects  a  sufficient  amount,  in  such  manner  as  to  afford 
reasonable  security  and  interest  for  the  same. 

Sec.  5397.  Interest,  Simple  or  Compound,  on  Omission  to 
Invest  Trust  Moneys. — If  a  trustee  omits  to  invest  the  trust 
moneys  according  to  the  last  section,  he  must  pay  simple  in- 
terest thereon,  if  such  omission  is  negligent  merely,  and  com- 
pound interest  if  it  is  willful. 

Mingling  Funds. 

Where  a  trustee  mingles  trust  funds  with  his  own,  the  entire  fund 
will  be  impressed  with  a  trust  for  the  benefit  of  the  cestui  que  trust. 
Yellowstone  County  v.  First  etc.  Savings  Bank,  46  Mont.  439. 

157 


158  STATE   LAWS   AND   DECISIONS. 

Care  Required. 

A  trustee  should  exercise  the  same  care  and  prudence  in  the  man- 
agement of  the  estate  that  men  of  ordinary  diligence  and  prudence 
exercise  in  the  management  of  their  own  affairs.  Eoush  v.  Fort,  3 
Mont.  185. 

Bate  of  Interest. 

An  executor  who  retains  trust  funds  which  he  should  have  de- 
posited in  bank  at  interest  cannot  be  compelled  to  pay  arbitrary  rates 
of  interest  or  compound  interest,  especially  when  there  is  no  fraud 
and  he  has  returned  the  money  and  accounted  for  a  higher  rate  than 
the  banks  would  have  paid.  In  re  Bicker's  Estate,  14  Mont.  153. 


NEBRASKA. 

TRUST    COMPANIES. 

Statutes    of    1911,    Ch.    31. 
(With   Amendments   to    1914.) 

Sec.  6.  Subdivision  7.  Trust  companies  have  power  to  loan 
money  upon  real  estate,  not  to  exceed  forty  per  cent  of  ap- 
praised value,  and  upon  collateral  security,  but  no  property 
shall  be  taken  as  collateral  except  such  property  as  would  it- 
self be  a  legal  investment  for  the  said  Corporation  under  this 
Act;  and  to  borrow  money  and  to  execute  and  issue  its  notes 
payable  at  a  future  date,  and  to  pledge  its  real  estate,  securi- 
ties, or  other  securities  therefor.  But  no  loan  shall  be  made  to 
any  officer  or  director  of  the  said  Corporation.  8th.  To  buy, 
own,  hold  and  sell  Government,  State,  County  and  municipal 
bonds  and  stocks,  warrants,  bills  of  exchange,  notes,  mortgages 
and  other  investment  securities,  negotiable  and  non-negotiable. 
But  it  shall  be  unlawful  for  any  Corporation  organized  under 
this  Act  to  buy  or  own  the  bonds  of  any  incorporation  (other 
than  municipal)  or  company,  the  interest  on  which  has  been 
in  default  for  a  period  of  two  years  next  preceding  the  date 
of  purchase,  and  it  shall  be  unlawful  for  it  to  buy  the  stocks 
of  any  corporation  except  those  that  have  earned  annual 
dividends  of  at  least  four  per  cent  per  annum  for  at  least 
three  years  just  prior  to  the  date  of  such  purchase.  No 
trust  company  shall  buy,  own  or  accept  as  collateral  the 
stock  of  any  Corporation  organized  under  this  Act. 

EXECUTORS    AND    ADMINISTRATORS. 

Annotated    Statutes,    1909. 

Sec.  5141.  The  executor  or  administrator  shall  not  make 
profit  by  the  increase,  nor  suffer  loss  by  the  decrease  or  de- 

159 


160  STATE  LAWS  AND  DECISIONS. 

struction  without  his  fault,  of  any  part  of  the  personal  estate, 
and  he  shall  account  for  the  excess  when  he  shall  sell  any 
part  of  the  personal  estate  for  more  than  the  appraisal,  and 
if  he  shall  sell  any  for  less  than  the  appraisal,  he  shall  not 
be  responsible  for  the  loss  if  it  shall  appear  to  be  beneficial 
to  the  estate  to  sell  it. 

Guardians. — Sections  5394  and  5397  provide  that  a  guar- 
dian must  manage  the  ward's  estate  frugally  and  without 
waste  and  that  the  probate  court  may  authorize  a  sale  of  the 
personal  property  and  investment  of  the  proceeds  and  any 
other  money  in  real  estate  or  in  such  other  manner  as  shall 
be  to  the  interest  of  the  ward. 

Deposit  in  Private  Account. 

Deposit  of  trust  funds  to  the  private  account  of  a  trustee  amounts 
to  a  conversion  to  his  own  use.  Dirks  v.  Juel,  59  Neb.  353. 

Mingling  Funds. 

When  a  trustee  mingles  funds  with  his  own,  the  trust  attaches  to 
the  whole  fund.  State  v.  Bank  of  Commerce,  61  Neb.  181;  City  of 
Lincoln  v.  Morrison,  64  Neb.  822. 

Purchasing  Trust  Property. 

If  a  trustee  purchases  the  trust  property,  the  sale  is  voidable.  The 
beneficiary  may  affirm  or  repudiate.  Shelby  v.  Creighton,  65  Neb.  485. 

Guardian. 

Section  27,  Chapter  34,  of  the  laws  of  1907,  requires  a  guardian 
to  obtain  an  order  of  court  authorizing  him  to  loan  the  ward's  money. 
If  he  neglects  to  do  this,  he  is  liable  for  any  loss.  In  re  Estate  of 
O'Brien,  80  Neb.  125. 


NEVADA. 

TRUST    COMPANIES. 

Laws    of    1911. 
(With   Amendments  to   1014.) 

The  laws  of  1911  provide  for  the  incorporation  of  banking 
corporations.  The  corporation  organized  under  the  act  may 
state  in  its  articles  of  incorporation  that  it  will  carry  on  a 
trust  company  business,  and  such  corporation  in  addition  to 
the  powers  conferred  upon  the  banks  shall  have  power  to  act 
as  trustee  under  bonds  and  mortgages  and  to  execute  cor- 
porate or  individual  trusts,  to  act  as  executor,  administrator, 
guardian  or  receiver.  The  same  law  under  Section  6  provides 
for  the  following  investments  for  savings  banks  and  is  ap- 
parently controlling  with  regard  to  trust  companies.  The 
funds  of  any  savings  bank,  except  the  reserve  provided  for 
in  this  act,  shall  be  invested  in  bonds  of  the  United  States, 
or  of  any  state  of  the  United  States,  or  in  the  public  debt  or 
bonds  of  any  city,  county,  township,  village  or  school  district 
of  any  state  of  the  United  States  which  shall  have  been  law- 
fully issued;  or  may  be  loaned  on  negotiable  paper  secured 
by  any  of  the  above  mentioned  classes  of  security;  or  upon 
notes  or  bonds  secured  by  mortgage  lien  upon  unencumbered 
real  estate;  provided,  that  second  mortgage  loans  may  be 
made  upon  improved  farm  lands,  but  no  loans  shall  be  made 
upon  such  lands  or  other  real  estate  which,  including  the 
aggregate  amount  of  all  encumbrances,  shall  exceed  fifty  per 
cent  of  the  cash  value  thereof;  or  upon  notes  secured  by  col- 
lateral security  of  known  marketable  value;  or  shall  be  de- 
posited in  good  solvent  banks  or  held  as  cash;  provided,  also, 
that  chattel  mortgages  shall  not  be  deemed  collateral  security, 
and  savings  banks  are  prohibited  from  investing  their  funds 
in  them. 

161 


162  STATE   LAWS   AND   DECISIONS. 

Sec.  2964.  Executors  and  Administrators. — Every  execu- 
tor and  administrator  shall  be  chargeable  in  his  account  with 
the  whole  of  the  estate  of  the  deceased  which  should  come 
to  his  possession  at  the  value  of  the  appraisement  contained 
in  the  inventory,  except  as  hereinafter  provided,  and  with 
all  the  interest,  profit  and  income  of  the  estate. 

Sec.  2965.  He  shall  not  make  profit  by  the  increase  nor 
suffer  loss  by  the  decrease  or  destruction  of  any  part  of  the 
estate  without  his  fault.  He  shall  account  for  the  excess  when 
he  shall  sell  any  part  of  the  estate  for  more  than  the  ap- 
praisement, and  if  any  be  sold  for  less  than  the  appraisement, 
he  shall  not  be  responsible  for  the  loss  if  the  sale  has  been 
justly  made. 

Sec.  2968.  No  administrator  or  executor  shall  purchase 
any  claim  against  the  estate  he  represents ;  and  if  he  shall  buy 
any  claim  for  less  than  its  nominal  value,  he  shall  not  charge 
in  his  account  more  than  he  has 'actually  paid. 

Repairs. 

An  executor  will  be  allowed  the  expenses  of  reasonable  repairs  and 
improvements.  Estate  of  Millenovich,  5  Nev.  161. 

Renting. 

When  an  executor  has  exercised  proper  diligence  and  good  faith, 
he  is  not  chargeable  with  loss  to  the  estate.  Eenting  property  of  the 
estate  at  a  reasonable  value,  with  a  view  to  the  desirability  of  the 
tenant,  is  all  that  can  be  expected  of  him.  Estate  of  Millenovich, 
5  Nev.  161. 

Corporate  Stock. 

Corporate  stock  of  doubtful  value  which  comes  into  the  hands  of 
a  trustee  should  be  disposed  of  under  an  order  of  the  probate  court. 
Estate  of  Millenovich,  5  Nev.  161. 

Guardian. 

It  seems  that  a  guardian,  if  he  would  protect  himself,  should  act 
only  in  accordance  with  an  order  of  the  probate  court.  Henderson  v. 
Coover,  4  Nev.  429. 


NEW   HAMPSHIRE. 

TRUSTEES    GENERALLY. 

Public    Statutes,    1901. 
(With   Amendments   to    1914.) 

Chapter  198.  Sec.  11.  Trustees  shall  be  accountable  for 
and  may  be  licensed  to  sell  stocks,  bonds,  and .  other  written 
evidences  of  debt,  and  shall,  when  not  otherwise  authorized, 
or  directed,  invest  money  and  the  proceeds  of  all  real  and 
personal  property  the  same  as  prescribed  for  guardians. 

Sec.  9.  Every  guardian  of  a  minor  shall  invest,  in  the 
name  of  his  ward,  or  in  his  own  name  as  guardian,  the  money 
and  the  proceeds  of  all  real  and  personal  property  of  his 
ward — except  stocks,  bonds  and  other  evidences  of  debt  re- 
ceived as  provided  in  the  preceding  section  (permitting  the 
retention  of  such  securities) — in  notes  secured  by  mortgage  of 
real  estate  at  least  double  in  value  of  the  notes,  in  some  in- 
corporated savings  bank  in  this  state,  or  in  the  bonds  or 
loans  of  this  state,  of  some  town,  city,  or  county  of  this  state, 
or  of  the  United  States,  and  in  no  other  way. 

(1895,  Chapter  71.  Sec.  1.  Trustees  and  guardians  shall  be 
authorized  to  invest  funds  in  their  hands  in  the  bonds  or 
direct  obligations  of  any  county,  city,  town,  school,  fire,  or 
water  district  in  New  England,  when  the  net  debt  of  said 
municipality  does  not  exceed  five  per  cent  of  the  last  assess- 
ment of  taxes  for  the  purpose  of  taxation.  The  term  "net 
debt"  shall  be  construed  to  denote  the  indebtedness  of  any 
municipality,  omitting  debt  created  for  supplying  the  in- 
habitants with  water,  and  deducting  the  amount  of  sinking 
funds  available  for  the  payment  of  the  indebtedness  of  the 
municipality.) 

Sec.  10.  Every  such  guardian  shall  return  to  the  probate 
court  a  statement  of  the  property  of  his  ward.  If  it  is  in- 

163 


164  STATE   LAWS   AND   DECISIONS. 

vested  as  provided  in  the  preceding  section,  and  the  invest- 
ment is  approved,  he  shall  be  accountable  for  it,  and  the 
income  thereof,  only  as  he  is  accountable  for  real  estate  of 
his  ward. 

Laws    of    1907. 

Chapter  15.  Sec.  1.  In  addition  to  the  authority  now 
existing  for  investing  trust  funds  in  the  hands  of  guardians 
and  other  trustees,  such  guardians  and  trustees  are  hereby 
authorized  to  invest  said  trust  funds  in  such  other  stocks  and 
bonds  as  are  and  may  from  time  to  time  become  legal  in- 
vestments for  savings  banks  in  this  state,  with  the  exception 
of  stocks  in  banking  corporations  and  trust  companies,  unless 
forbidden  so  to  do  by  the  instrument  creating  the  trust. 

Chapter  16.  Sec.  1.  Any  guardian  or  trustee  who  now 
holds  or  shall  hereafter  hold  any  stock,  bonds  or  other  written 
evidence  of  debts  which  he  shall  have  received  from  an  ad- 
ministrator by  order  of  the  judge  of  probate,  or  from  his  ward 
or  cestui  que  trust,  or  from  any  one  in  behalf  of  said  ward  or 
cestui  que  trust,  as  a  part  of  the  estate  of  said  ward  or  cestui 
que  trust,  may  with  the  approval  of  the  judge  of  probate 
continue  to  hold  the  same  and  be  accountable  for  the  same 
and  the  income  thereof,  only  as  he  is  accountable  for  real 
estate  of  his  ward  or  cestui  que  trust. 

Sec.  2.  Nothing  herein  contained  shall  relieve  any  guar- 
dian or  trustee  from  liability  on  account  of  his  want  of  due 
care  and  diligence  in  dealing  with  any  property  so  held  by 
him. 

SAVINGS    BANKS. 

Since  trustees  may  invest  in  securities  which  are  legal  for 
savings  banks,  it  is  necessary  to  add  the  statutes  relating  to 
such  investments. 

Chapter  114.  Sec.  1.  On  and  after  the  passage  of  this 
act,  savings  banks  and  savings  departments  of  banking  and 
trust  companies  shall  make  investment  of  their  funds  in  the 
following  classes  of  securities  only: 

1.     In  notes  secured  by  first  mortgage  of  real  estate  situ- 


NEW   HAMPSHIRE.  165 

ated  in  New  Hampshire ;  but  not  over  seventy  per  cent  of 
the  value  of  the  property  covered  shall  be  so  loaned,  and  not 
exceeding  seventy  per  cent  of  the  deposits  shall  be  so  invested. 

2.  In  notes  secured  by  first  mortgage  of  real  estate  situ- 
ated outside   of  New  Hampshire  which  is  at  the  time   im- 
proved, occupied,  and  productive;  but  not  over  fifty  per  cent 
of  the  value  of  the  property  covered  shall  be  so  loaned,  and 
not  exceeding  twenty-five  per  cent  of  the  deposits  shall  be 
so  invested. 

3.  In  notes  secured  by  collateral  in  which  the  bank  is 
at  liberty  to  invest  of  a  value  at  least  ten  per  cent  in  excess 
of  the  face  of  the  notes.     The  amount  of  any  one  class  of 
securities   so  taken  as   collateral,   added  to  that   which   the 
bank  may  own  at  the  time,  shall  not  exceed  the  total  limit  of 
that  class  of  security;  but  not  exceeding  twenty-five  per  cent 
of  the  deposits  shall  be  so  invested. 

4.  In   notes   secured   by    collateral   securities    which   are 
dealt  in  on  the  stock  exchanges  of  Boston  and  New  York,  the 
stock  exchange  price  of  which  shall  at  all  times  be  at  least 
twenty  per  cent  in  excess  of  the  face  of  the  note,  while  held 
by  the  bank;  but  not  exceeding  twenty-five  per  cent  of  the 
deposits  shall  be  so  invested. 

5.  In  notes  of  individuals  or  corporations  with   two   or 
more   signers   or  one  or  more  indorsers ;  but  not  exceeding 
five  per  cent  of  the  deposits  shall  be  loaned  any  one  person 
or  corporation  in  this  class  of  security,  and  not  exceeding 
twenty-five  per  cent  of  the  deposits  shall  be  so  invested. 

6.  In  the  public  funds  of  the  United  States,  or  those  for 
which  the  faith  of  the  United  States  is  pledged  to  provide  for 
the  payment  of  the  interest  and  principal. 

7.  In  the  bonds  and  notes  of  this  state  or  of  any  county, 
city,  town,  precinct,  or  district  of  this  state. 

8.  In  the  authorized  bonds  or  notes  of  any  state  or  terri- 
tory of  the  United  States;  and  in  the  bonds  or  notes  of  any 
city  of  the  states  of  Maine,  Yermont,  Massachusetts,  Rhode 
Island,    Connecticut   or   New  York,   whose  net  indebtedness 
does  not  exceed  five  per  cent  of  the  last  preceding  valuation 
of  the  property  therein  for  taxation,  or  of  any  county,  town, 


166  STATE   LAWS   AND   DECISIONS. 

village,  precinct,  or  district  in  said  states  whose  net  indebted- 
ness does  not  exceed  three  per  cent  of  such  valuation. 

9.  In  the   authorized   bonds   of  any  county,   city,  town, 
school  district,  or  other  municipal  corporation  of  any  other 
of  the  United  States  or  territories  whose  net  indebtedness  at 
the  time  of  such  investment  does  not  exceed  five  per  cent  of 
the  last  preceding  valuation  of  the  property  therein  for  taxa- 
tion; and  in  the  authorized  bonds  of  any  city  of  one  hundred 
thousand  inhabitants  of  any  of  said  states  whose  net  indebt- 
edness does  not  exceed  seven  per  cent  of  the  last  preceding 
valuation   of  the   property  therein  for   taxation.      The   term 
"net  indebtedness"  shall  be  construed  to  denote  the  indebt- 
edness  of   any    city,    town,   or   other   municipal   corporation, 
omitting  the  debt  created  for  supplying  the  inhabitants  with 
water  and  deducting  the  amount  of  any  sinking  fund  avail- 
able for  the  payment  of  the  municipal  indebtedness.     Pro- 
vided, however,  that  such  bonds  shall  not  have  been  issued 
in  aid  of  railroads  or  for  special  assessment  purposes.     Pro- 
vided, also,  that  the  bonds  of  any  county,  city,  or  town  of 
less  than  ten  thousand  inhabitants,  or  of  any  school  district 
or   other  municipal    corporation   of  less   than  two    thousand 
inhabitants,  in  any  state  or  territory  other  than  those  named 
in  paragraph  eight  of  section  one  of  this  act,  shall  not  be 
authorized  investments.     Provided  further,  that  such  bonds 
are  issued  by  municipalities  that  are  permitted  by  law   to 
levy  taxes  sufficient  to  pay  the  interest  and  to  provide  sink- 
ing funds  for  their  debt;  otherwise  such  bonds  shall  not  be 
authorized   investments.     But  not   exceeding   fifty  per    cent 
of  the  deposits  shall  be  so  invested. 

10.  In  the  bonds  or  notes  of  any  railroad  company,  ex- 
cept  street   railways,   incorporated    under   the   laws    of   this 
state,  whose  road  is  located  wholly  or  in  part  in  the  same; 
but  not  exceeding  twenty-five  per  cent  of  the  deposits  shall 
be  so  invested. 

11.  In  the  bonds  of  any  railroad  company,  except  street 
railways,  incorporated  under  the  authority  of  any  of  the  New 
England  states,  whose  road  is  located  wholly  or  in  part  in 
the  same,  and  which  is  in  possession  and  operating  its  own 


NEW  HAMPSHIRE.  167 

road,  and  has  earned  and  paid  regular  dividends  for  the  two 
years  next  preceding  such  investment;  or  in  the  bonds  guar- 
anteed or  assumed  by  such  railroad  company;  but  not  ex- 
ceeding twenty-five  per  cent  of  the  deposits  shall  be  so  in- 
vested. 

12.  In  the  bonds  of  any  railroad  company,  except  street 
railways,   incorporated   under   the    authority    of   any   of   the 
United  States  or  territories,  which  is  in  possession  of  and 
operating  its  own  road  and  has  earned  and  paid  regular  divi- 
dends of  not  less  than  four  per  cent  per  annum  on  its  capital 
stock  for  the   three  years   next  preceding   such  investment; 
provided,  such  capital  stock  on  which  it  earns  and  pays  divi- 
dends equals  in  amount  one-third   of  the  entire  bonded  in- 
debtedness   of    said   road;    or    in   the    bonds    guaranteed    or 
assumed  by  such  railroad;  but  not  exceeding  twenty-five  per 
cent  of  the  deposits  shall  be  so  invested. 

13.  In  the.  first  mortgage  bonds  of  corporations  of  this 
state,   except   street  railways,    located    and    doing    business 
therein  whose  net  indebtedness  at  the  time  of  such  investment 
does  not  exceed  its  capital  stock  actually  paid  in  and  re- 
maining unimpaired;  but  not  exceeding  ten  per  cent  of  the 
deposits  shall  be.  so  invested. 

14.  In  the  bonds    of  street  railway   corporations   incor- 
porated under  the  laws  of  this  state  and  located  wholly  or  in 
part  in  the  same,  and  in  the  bonds  of  street  railway  corpora- 
tions located  wholly  or  in  part  in  cities  of  thirty  thousand 
inhabitants  or  more  in  any  of  the  other  New  England  states, 
and  in  the  bonds  of  street  railway  corporations  located  wholly 
or  in  part  in  cities  of  fifty  thousand  inhabitants,  or  more,  in 
any  of  the  United  States;  provided,  that  the  net  indebted- 
ness of  any   of  such  street  railway  corporations   mentioned 
in  this  paragraph  does  not  exceed  the  capital  stock  actually 
paid  in  and  remaining  unimpaired  at  the  time  of  such  in- 
vestment,   and   that  such   corporation  has    earned   and  paid 
regular  dividends  of  not  less  than,  four  per  cent  per  annum 
on  its  capital  stock  for  five  years  next  preceding  such  invest- 
ment; but  not  exceeding  ten  per  cent  of  the  deposits  shall 
be  so  invested. 


168  STATE   LAWS   AND   DECISIONS. 

15.  In  the  bonds  of  telephone,  telegraph,  or  express  com- 
panies doing  business  in  the  United  States  or  territories ;  pro- 
vided, the  total  indebtedness  of  such  company  does  not  exceed 
its  capital  actually  paid  in  and  remaining  unimpaired,  and 
provided,  such  company  has   earned  and  paid  regular   divi- 
dends of  at  least  four  per  cent  per  annum  upon  its  capital 
stock  of  shares  for  five  years  previous  to  such  investment; 
but  not  exceeding  ten  per  cent  of  the  deposits  shall  be  so 
invested. 

16.  In  the  capital  stock   of  any  banking  or  trust   com- 
pany incorporated  under  the   laws   of  this  state   and   doing 
business  therein,  but  the  amount  of  such  stock  held  by  any 
savings  bank  as  an  investment  and   as  collateral  for  loans 
shall  not  exceed  one-tenth  of  the  total  capital  stock  of  such 
banking  or  trust  company,  and  not  exceeding  ten  per  cent 
of  the  deposits  shall  be  so  invested. 

17.  In  the  stock  of  any  national  bank  or  Jrust  company 
located  in  the  New  England  states  or  the  state  of  New  York, 
but  not  exceeding  ten  per  cent  of  the  deposits  of  a  savings 
bank  shall  be  invested  in  such  stock;  the  amount  of  stock  in 
any  national  bank  or  trust  company  in  this  state  which  may 
be  held  by  any  savings  bank  as  an  investment  or  as  collateral 
•security  for  loans  shall  not  exceed  twenty-five  per  cent  of  the 
capital  stock  of  said  national  bank  or  trust  company ;  and  the 
amount  of  stock  in  any  national  bank  or  trust  company  out- 
side of  this  state  which  may  be  held  by  any  savings  bank 
as  an  investment  or  as  collateral  for  loans  shall  not  exceed 
one-tenth  of  the  capital  stock  of  said  national  bank  or  trust 
company. 

18.  In  the  stock  or  notes  of  any  railroad  corporation,  ex- 
clusive of  street  railways,  located  in  any  part  of  the  United 
States  or  territories  that  has  earned  and  paid  regular  divi- 
dends of  not  less  than  four  per  cent  per  annum  on  its  capital 
stock  for  five  years   next  preceding   such   investment;   pro- 
vided, such  capital  stock  on  which  it  pays  dividends  equals 
in   amount   one-third   of   the   entire   bonded   indebtedness    of 
said  corporation;  or  in  the  stock  of  any  other  railroad  cor- 
poration whose  railroad  and  railroad  property  are  leased  to 


NEW  HAMPSHIRE.  169 

such  railroad  upon  an  annual  rental  of  not  less  than  four  per 
cent  per  annum  upon  the  capital  stock  of  the  leased  railroad; 
provided,  said  leased  railroad  shall  have  earned  dividends  of 
not  less  than  three  per  cent  upon  its  capital  stock  for  a  period 
of  three  years  immediately  preceding  said  lease;  but  not  ex- 
ceeding twenty-five  per  cent  of  the  deposits  shall  be  so 
invested. 

19.  In  the  stock  or  notes  of  any  manufacturing  company 
in  the  New  England  states  that  has  paid  regular  dividends  on 
its  capital  stock  for  five  years  previous  to  such  investment, 
and  whose  net  indebtedness  does  not  exceed  the  amount  of 
its  capital  stock  fully  paid  in ;  but  not  exceeding  ten  per  cent 
of  the  deposits  shall  be  so  invested. 

20.  In  the  stock  or  notes  of  any  parlor  car  or  sleeping 
car  company  incorporated  and  doing  business  in  the  United 
States,  and  whose  cars  are  in  actual  use  upon  any  railroad 
whose  stock  is  a  legal  investment  for  New  Hampshire  savings 
banks,  and  that  has  earned  and  paid  regular  dividends  of  not 
less  than  four  per  cent  per  annum  on  its  capital   stock  for 
five  years  next  preceding  such  investment;  but  not  exceeding 
five  per  cent  of  the  deposits  shall  be  so  invested. 

21.  In  land  and  building  suitable  and  actually  used  by 
it  in  part  for  its  banking  room,  the  total  cost  of  which  shall 
not  exceed  ten  per  cent  of  its  deposits. 

22.  In  the  stock  of  any  real  estate  trust  company  of  this 
state  and  whose  property  is  occupied  and  improved  and  is 
located  in  this  state,  whose  capital  stock  is  one  hundred  thou- 
sand dollars  or  more,  provided  the  total  indebtedness  of  such 
company  does  not  exceed  one-half  of  the  capital  stock  actually 
paid  in  and  remaining  unimpaired,  and  provided  such  com- 
pany has  earned  and  paid  regular  dividends  of  at  least  four 
per  cent  per  annum  upon  its  capital  stock  or  shares  for  five 
years   previous  to   such   investment;  but  not  exceeding  five 
per  cent  of  the  deposits  shall  be  so  invested. 

Loan  and  Investment  Book  Must  be  Kept. — There  shall  be 
kept  by  every  savings  bank,  state  bank  and  trust  company 
in  this  state,  in  a  separate  book  especially  provided  for  that 
purpose,  a  record  of  all  loans  and  investments  of  every  de- 


170  STATE  LAWS  AND  DECISIONS. 

scription  made  by  said  institution,  substantially  in  the  order 
.of  the  time  when  such  loans  or  investments  are  made,  which 
shall  show  that  such  loans  or  investments  have  been  made 
with  the  approval  of  the  investment  committee  of  such  insti- 
tution, and  which  shall  indicate  such  particulars  respecting 
such  loans  or  investments  as  the  bank  commissioners  shall 
direct.  This  book  shall  be  submitted  to  the  trustees  and  to 
the  bank  commissioners  at  each  examination  required  by  law. 
Such  loans  or  investments  shall  be  classified  in  this  book 
in  such  a  manner  as  the  bank  commissioners  shall  direct. 

Guardians. — Prior  to  1866,  there  was  no  statute  specify- 
ing the  nature  of  investments  for  guardians.  An  act  passed 
in  that  year  provided  for  investments  in  notes  secured  by 
mortgage  of  real  estate  at  least  double  the  value  of  the  notes, 
or  in  some  incorporated  savings  bank  in  the  state,  or  in  the 
bonds  of  the  United  States,  of  this  state,  or  some  town,  or 
county  within  the  state,  and  in  no  other  way  whatever.  It 
was  made  lawful  for  a  guardian  to  receive  bonds,  stocks,  or 
other  evidence  of  debt,  wherever  invested,  from  any  adminis- 
trator, and  to  hold  the  same  with  the  approval  of  the  probate 
court.  These  provisions  now  exist  in  General  Laws,  Chapter 
185,  Sections  10  and  11,  and  in  Public  Statutes,  Chapter  178, 
Sections  8  and  9. 

Must  Invest. 

A  good  reason  must  be  shown  for  failure  to  invest,  but  small  sums 
for  expenses  may  be  retained.  Knowlton  v.  Bradley,  17  N.  H.  458. 

Mingling  Funds   with  His   Own. 

A  trustee  who  mingles  funds  with  his  own  is  chargeable  with  in- 
terest at  five  per  cent.  Gordon  v.  West,  8  N.  H.  455;  Knowlton  v. 
Bradley,  17  N.  H.  458;  Stark  v.  Gamble,  43  N.  H.  465. 

Personal   Security. 

Prior  to  the  statutes  of  1866,  it  seems  that  the  rule  which  pro- 
hibits trustees  from  investing  in  personal  securities  was  not  strictly 
enforced,  although  it  was  said  that  for  any  but  small  sums,  the  funds 
should  be  deposited  in  savings  banks  or  invested  in  mortgages  or  upon 
a  note  with  a  surety.  Knowlton  v.  Bradley,  17  N.  H.  458. 


NEW  HAMPSHIRE.  171 

Corporate    Stock. 

A  trustee  may  not  invest  in  corporate  stock  unless  he  is  expressly 
authorized  to  do  so  in  the  trust  instrument.  This  rule  is  not  changed 
by  words  in  the  instrument  giving  the  trustee  discretion  in  the  selec- 
tion of  investments,  "according  to  his  best  skill  and  judgment."  Kim- 
ball  v.  Eeding,  31  N.  H.  352.  But  the  statute  now  provides  for  in- 
vestments in  stocks  of  corporations,  excepting  banks  and  trust  com- 
panies, which  fulfill  certain  specified  conditions. 

Even  if  he  has  power  to  invest  in  stocks,  they  must  appear  to  have 
been  productive  at  the  time  of  investment.  Kimball  v.  Eeding,  31 
N.  H.  352. 

It  seems  that  where  a  guardian  receives  stocks  as  a  part  of  his 
ward's  estate,  he  may  hold  and  account  for  them.  French  v.  Currier, 
47  N.  H.  88;  Stevens  v.  Meserve,  73  N.  H.  293. 

Continuing  Business  of  Testator. 

Unless  specifically  authorized  so  to  do,  trustees  have  no  power 
to  continue  the  business  of  a  testator.  Eaynes  v.  Eaynes,  54  N.  H.  201. 

Executors  and  Trustees  Generally. 

Executors  and  trustees  are  under  the  same  duties  and  obligations  in 
making  investments  as  guardians.  They  are  therefore  subject  to  the 
provisions  of  section  9,  chapter  178,  of  the  Public  Statutes.  Bell  v. 
Sawyer,  59  N.  H.  393. 

Mortgages  in  Other  States. 

It  seems  that  no  objection  has  been  raised  by  the  New  Hamp- 
shire courts  to  investments  in  mortgages  on  property  located  in  other 
states,  provided  it  is  of  the  required  value.  Stevens  v.  Meserve,  73 
N.  H.  293. 

Value. 

The  exercise  of  reasonable  care  and  diligence  in  determining  value 
of  an  investment  relieves  the  trustee  from  liability  for  subsequent  de- 
preciation. And  when  he  settles  a  desperate  claim  by  taking  security 
which  he  knows  is  less  than  the  required  value,  but  which  he  takes 
to  save  something  for  the  estate,  he  will  be  protected.  Stevens  v. 
Meserve,  73  N.  H.  293. 

Deposit  in  Savings  Department  by  Trust  Company. 

Deposit  of  trust  funds  by  a  trust  company  in  its  savings  depart- 
ment is  legal.  Tucker  v.  New  Hampshire  Trust  Co.,  69  N.  H.  187. 


NEW    JERSEY. 

TRUSTEES    GENERALLY. 

Statutes    of    1910. 
(With   Amendments   to    1914.) 

Sec.  34.  Investment  by  Testator,  Continuance  by  Executor, 
Trustee  or  Administrator  with  Will  Annexed. — Sec.  1.  When- 
ever any  testator  shall  have  made,  in  his  lifetime,  any  in- 
vestment of  money  in  municipal  bonds  or  on  bond  secured 
by  mortgage,  or  in  the  bonds  or  stock  shares  of  any  corpora- 
tion, and  the  same  bonds,  mortgages  or  stock  shares  shall 
have  come  into  the  hands  of  the  executor  of  or  trustee  under 
the  will  of  such  testator  or  of  the  administrator  with  the  will 
annexed,  to  be  administered,  and  such  executor,  administrator 
or  trustee  may,  in  the  exercise  of  good  faith  and  reasonable 
discretion,  have  continued  such  investment,  or  may  hereafter 
continue  the  same,  he  shall  not  be  accountable  for  any  loss  by 
reason  of  such  continuance. 

Sec.  3,5.  Investments  by  Executor,  Administrator,  Guar- 
dian or  Trustee,  Securities  Specified. — Sec.  2.  Any  executor, 
administrator,  guardian  or  trustee,  whose  duty  it  may  be  to 
loan  the  money  intrusted  to  him,  may  invest  the  same  in  any 
of  the  following  securities: 

(1)  Bonds  issued  by  the  United  States  of  America; 

(2)  Bonds  issued  by  this  state; 

(3)  Bonds  of  any  county,  city,  town  or  township  of  this 
state,  issued  pursuant  to  the  authority  of  any  law  of  this 
state  where  the  total  indebtedness  of  said  county,  city,  town 
or  township   does   not  exceed   in  the   aggregate   fifteen  per 
centum  of  the  assessable  valuation  of  taxable  property  within 
such  county,  city,  town  or  township ; 

(4)  Bonds  secured  by  mortgage  which  shall  be  a  first  lien 
upon  real  estate  estimated  to  be  worth  at  least  twice   the 

172 


NEW   JERSEY.  173 

amount  loaned  at  a  rate  of  interest  not  less  than  three  per 
centum,  nor  greater  than  six  per  centum  per  annum. 

Sec.  36.  Act  Not  to  Apply  Where  Deed,  Will,  or  Court  Di- 
rects Manner  of  Investment. — Sec.  3.  This  act  shall  not  apply 
where  the  deed  of  trust,  or  the  last  will  and  testament  of  any 
testator,  or  any  court  having'  jurisdiction  of  the  matter  spe- 
cially directs  in  what  manner  the  trust  fund  shall  be  in- 
vested. 

Sec.  37.  Investments  by  Executors,  Administrators,  Guar- 
dians or  Trustees,  Additional  Securities. — Sec.  1.  Any  execu- 
tor, administrator,  guardian  or  trustee  whose  duty  it  may  be  to 
loan  money  intrusted  to  him,  in  addition  to  the  securities  in 
which  he  may  invest  the  same  under  the  provisions  of  the  act 
to  which  this  is  a  supplement,  may  invest  the  same  in  any 
loans  or  securities  in  which  savings  banks  of  this  state  may 
invest  their  f.unds  by  the  provisions  of  any  general  law  of 
this  state. 

Orphans'  Courts — Order  of  Court. — In  addition  to  the  above 
authorized  investments,  there  are  statutory  provisions  relating 
to  investments  under  the  supervision  of  Orphans'  Courts.  Sec- 
tion 136  provides  that  executors,  administrators,  guardians 
and  trustees  may  invest  under  the  direction  of  the  Orphans' 
Court  and  Section  137  enumerates  the  securities  in  which  such 
trustees  may  invest  without  an  order  of  court.  Although  the 
statutes  are  not  in  complete  harmony,  they  are  sufficiently 
definite  to  furnish  a  guide  to  trustees.  Section  137,  relating 
to  Orphans'  Courts,  is  as  follows: 

Sec.  137.  Investments. — Any  executor,  administrator,  guar- 
dian or  trustee  whose  duty  it  may  be  to  loan  or  invest  money 
intrusted  to  him  as  such,  may,  without  any  special  order  of 
any  court,  invest  the  same  or  any  part  thereof  in  any  of  the 
following  securities : 

United  States  Bonds. — In  bonds  or  interest-bearing  notes 
or  obligations  of  the  United  States,  or  those  for  which  the 
faith  of  the  United  States  is  distinctly  pledged  to  provide 
for  the  payment  of  the  principal  and  interest  thereof. 

State  Bonds. — In  bonds  of  any  state  in  the  Union  which 
has  not  within  ten  years  previous  to  the  making  of  such  in- 


174  STATE   LAWS   AXD   DECISIONS. 

vestment  defaulted  in  the  payment  of  any  part  of  either 
principal  or  interest  on  any  of  its  bonds  issued  by  authority 
of  the  legislature  of  such  state. 

Municipal  or  School  Bonds. — In  the  bonds  or  interest- 
bearing  notes  or  obligations  of  any  county,  city,  town,  town- 
ship, borough,  village  or  public  school  district  of  this  state, 
or  of  the  City  of  New  York  or  of  the  City  of  Philadelphia ; 
provided,  the  indebtedness  of  the  county,  city,  town,  town- 
ship, borough  or  village  does  not  exceed  in  the  aggregate 
fifteen  per  centum  of  the  assessable  valuation  of  all  taxable 
property  within  such  county,  city,  town,  township,  borough  or 
village,  exclusive  of  obligations  issued  for  public  school  pur- 
poses. 

Railroad  Bonds. — In  first  mortgage  bonds  of  any  railroad 
company  which  has  paid  dividends  of  not  less  than  four  per 
centum  per  annum  regularly,  on  its  entire  capital  stock,  for  a 
period  of  not  less  than  five  years  next  previous  to  the  pur- 
chase of  such  bonds,  or  in  any  consolidated  mortgage  bonds 
of  any  such  company  authorized  to  be  issued  to  retire  the 
entire  bonded  debt  of  such  company. 

Mortgages  on  Real  Estate. — In  bonds  secured  by  first 
mortgage  upon  real  estate ;  provided,  the  amount  loaned 
upon  any  such  bond  and  mortgage  shall  not  at  the  time  of 
making  such  loan  exceed  sixty  per  centum  of  the  estimated 
worth  of  the  real  estate  covered  by  such  mortgage;  provided, 
also,  that  the  rate  of  interest  upon  any  of  the  above  enumer- 
ated securities  in  which  such  investments  may  be  made  shall 
not  be  less  than  three  per  centum  nor  more  than  six  per 
centum  per  annum ;  this  act  shall  not  apply  where  the  deed  of 
trust,  or  the  last  will  and  testament  of  any  testator,  or  any 
court  having  jurisdiction  of  the  matter  specially  directs  in 
what  securities  the  trust  funds  shall  be  invested,  and  every 
such  court  is  hereby  given  power  to  specially  direct  by  order 
or  orders,  from  time  to  time,  additional  securities  in  its  dis- 
cretion in  which  trust  funds  may  be  invested  and  any  invest- 
ment thereof  made  in  accordance  with  any  such  special  direc- 
tion shall  be  legal,  and  no  executor,  administrator,  guardian 


NEW   JERSEY.  175 

or  trustee  shall  be  held  liable  for  any  loss  resulting  in  any 
such  case. 

SAVINGS    BANKS. 

Savings  Banks. — Since  trustees  are  authorized  to  invest  in 
securities  which  are  legal  for  savings  banks,  it  is  necessary  to 
set  forth  the  portions  of  Section  33,  of  the  Savings  Bank  Law, 
which  relate  to  legal  investments. 

Sec.  33.  No  savings  bank  shall  invest  the  moneys  de- 
posited with  the  same  in  any  manner  except  as  follows,  to  wit : 

United  States  Securities. — 1.  In  stocks  or  bonds  or  inter- 
est-bearing notes  or  obligations  of  the  United  States,  or  those 
for  which  the  faith  of  the  United  States  is  distinctly  pledged 
to  provide  for  the  payment  of  the  principal  and  interest 
thereof; 

State  Bonds. — 2.  In  the  interest-bearing  notes  of  this 
state ;  or  in  any  bonds  authorized  by  the  laws  of  this  state  to 
be  issued  by  any  commission  appointed  by  the  Supreme  Court 
of  this  state,  by  virtue  of  any  law  of  this  state; 

Bonds  of  Foreign  States. — 3.  In  the  bonds  of  any  state 
in  the  Union  that  has  not,  within  ten  years  previous  to  mak- 
ing such  investment  by  any  such  bank,  defaulted  in  the  pay- 
ment of  any  part  of  either  principal  or  interest  in  any  debt 
authorized  by  any  law  of  such  state  to  be  contracted; 

Municipal  Bonds. — 4.  In  the  bonds  of  any  county,  town- 
ship, municipality  or  school  district  of  this  state  issued  pur- 
suant to  the  authority  of  any  law  of  this  state ;  provided,  such 
county,  township,  municipality  or  school  district  shall  not, 
within  the  five  years  next  preceding,  have  defaulted  in  the 
payment  of  any  part  of  either  principal  or  interest  of  any 
legal  debt  or  obligation  thereof;  and  provided  further,  the 
total  indebtedness  of  any  borough  or  village  does  not  exceed 
ten  per  centum  of  its  assessed  valuation,  and  such  school  dis- 
trict bonds  are  by  law  charged  upon  all  the  property  of  the 
inhabitants  of  such  district ;  or  in  any  interest-bearing  obliga- 
tion issued  by  any  city,  town,  township,  borough  or  village 
in  such  county. 

City  or  County  Bonds  of  Other  States. — 5.    In  the  bonds 


176  STATE   LAWS   AND   DECISIONS. 

of  any  city  or  county  of  any  other  state  of  the  Union  issued 
pursuant  to  the  authority  of  any  law  of  any  such  state ;  pro- 
vided, no  such  city  or  county  has,  within  ten  years  previous 
to  making  such  investment,  defaulted  in  the  payment  of  any 
part  of  either  principal  or  interest  of  any  debt  authorized  by 
law  of  such  state  to  be  contracted;  and  provided  further,  the 
total  indebtedness  of  any  such  city  or  county  is  limited  by 
law  to  ten  per  centum  of  its  assessed  valuation. 

Railroad  Bonds. — 6.  In  first  mortgage  bonds  issued,  guar- 
anteed, or  assumed  by  any  railroad  company,  which  has  paid 
dividends  of  not  less  than  four  per  centum  per  annum  regu- 
larly, on  its  entire  capital  stock,  for  a  period  of  not  less  than 
five  years  next  previous  to  the  purchase  of  such  bonds,  or  in 
any  consolidated  mortgage  bonds  issued,  guaranteed,  or  as- 
sumed by  any  such  company,  authorized  to  be  issued  to  retire 
the  entire  bonded  debt  of  such  company;  or  in  the  bonds  of 
any  railway  terminal  or  dock  company  of  this  state,  secured 
by  first  mortgage  on  terminal  or  dock  property  fronting  on 
the  Hudson  River  and  having  an  assessed  value  for  the  pur- 
pose of  taxation  in  excess  of  the  amount  of  the  entire  issue 
of  bonds,  and  used  and  occupied  as  a  dock  or  terminal  by  any 
railroad  company  now  operating  in  this  state; 

Bond  and  Mortgage. — 7.  In  bonds  secured  by  mortgages 
which  shall  be  a  first  lien  on  real  estate  situate  in  this  state, 
and  worth  at  least  double  the  amount  loaned  thereon,  but 
not  to  exceed  eighty  per  cent  of  the  whole  deposits  shall  be 
so  loaned  or  invested;  but  in  case  the  loan  is  on  unimproved 
or  unproductive  real  estate,  the  amount  loaned  thereon  shall 
not  be  more  than  thirty  per  centum  of  its  actual  value;  and 
no  investment  in  any  bond  and  mortgage  shall  be  made  by 
any  savings  bank,  except  upon  the  report  of  a  committee  of 
at  least  three  of  the  managers,  and  two  members  of  which 
committee  shall  certify  in  writing  to  the  value  of  the  prem- 
ises mortgaged,  or  to  be  mortgaged,  according  to  their 
best  judgment ;  such  report  shall  be  filed  and  preserved  among 
the  records  of  the  bank. 

Real  Estate. — 8.  In  real  estate  strictly  in  accordance  with 
the  following  provisions: 


NEW  JERSEY.  177 

Bank  Building. — (a)  A  plot  whereon  is  erected,  or  may 
be  erected,  a  building  or  buildings  requisite  for  the  con- 
venient transaction  of  its  business,  and  from  portions  of  which 
not  required  for  its  own  use,  a  revenue  may  be  derived;  the 
costs  of  such  building  or  buildings  and  lot  shall  in  no  case 
exceed  fifty  per  cent  Of  the  net  surplus  of  such  bank,  except 
with  the  written  approval  of  the  commissioner  of  banking 
and  insurance ;  provided,  the  limitations  as  to  the  cost  of  such 
lot  and  building  contained  in  this  subdivision  shall  not  apply 
to  or  affect  any  such  investment  heretofore  made  by  a  savings 
bank  organized  under  a  special  charter; 

Property  Acquired  by  Foreclosure,  etc. — (b)  Such  as 
shall  have  been  purchased  or  acquired  by  it  at  sales  upon  the 
foreclosure  of  mortgages  owned  by  such  corporation,  or  upon 
judgments  or  decrees  obtained  or  rendered  for  debts  due 
to  it,  or  in  settlements  effected  to  secure  such  debts  or  in 
satisfaction  of  such  mortgages;  and  all  such  real  estate  shall 
be  sold  by  such  bank  within  five  years  after  the  same  shall 
have  been  so  purchased,  unless,  upon  application  by  such  cor- 
poration to  the  commissioner  of  banking  and  insurance,  he 
shall  extend  the  time  within  which  such  sale  shall  be  made; 
the  provisions  of  this  section  shall  apply  to  all  funds  of  any 
savings  bank,  including  its  reserve  fund,  and  all  investments 
of  money  and  sales  and  transfers  of  securities  may  be  made 
in  the  manner  provided  and  made  lawful  in  this  act,  notwith- 
standing any  provision  in  any  special  charter  contained  limit- 
ing the  number  of  trustees  or  managers  who  shall  act  in  the 
investment  of  moneys  and  the  sale  or  transfer  of  stocks  or 
securities. 

34.  Loans  on  Collateral  Security. — No  savings  bank  shall 
loan  the  money  on  deposit  with  the  same,  or  any  part  thereof, 
upon  notes,  bills  of  exchange  or  drafts,  except  upon  the  addi- 
tional pledge  of  collateral  security,  which  shall  be  of  the  same 
nature  and  character  as  those  in  which  the  money  deposited 
may  be  invested  as  directed  in  the  preceding  section,  or  the 
capital  stocks  of  national  and  state  banks,  or  the  capital  stock 
or  bonds  of  other  corporations  of  this  state,  which  have  not 
defaulted  in  the  payment  of  interest  or  dividends,  upon  the 


178  j  STATE   LAWS   AND   DECISIONS. 

collateral  loaned  upon,  within  two  years  next  preceding  the 
time  of  such  loan,  and  then  only  to  the  extent  of  eighty  per 
centum  of  the  market  value  of  such  collaterals;  provided,  the 
total  amount  of  such  loans  shall  not  exceed  fifteen  per  centum 
of  the  total  deposits  held  by  such  savings  bank. 

35.  Penalty. — A  violation  of  any  of"  the  provisions  of  the 
two  preceding  sections  by  any  of  the  managers  or  other  officers 
of  any  savings  bank  shall  be  a  misdemeanor,  and  upon  con- 
viction thereof  any  person  so  offending  shall  be  punished  by  a 
fine  of  not  less  than  two  hundred  and  fifty  dollars  nor  more 
than  one  thousand  dollars,  or  imprisonment  for  a  term  not' 
exceeding  two  years  at  the  discretion  of  the  court. 

Trust  Companies — Mingling-  Funds — Loans  to  Officers. — 
The  trust  company  law  of  New  Jersey  provides  that  "no 
money,  property  or  securities  received  or  held  by  any  trust 
company  in  its  capacity  of  assignee,  receiver,  executor,  admin- 
istrator, guardian  or  trustee  shall  be  mingled  with  the  in- 
vestments of  the  capital  stock  or  other  moneys  or  property 
belonging  to  or  deposited  with  such  corporation."  The  law 
also  provides  that  no  trust  company  shall  make  any  loan  to 
its  president,  vice-president,  treasurer,  secretary,  cashier,  or 
to  any  of  its  directors,  or  any  of  its  clerks,  tellers,  book- 
keepers, agents,  servants  or  other  persons  in  its  employ  until 
the  proposition  to  make  such  loan,  stating  the  amount,  terms 
and  security,  if  any,  offered  therefor,  shall  have  been  sub- 
mitted in  writing  by  the  person  desiring  the  same  to  a  meet- 
ing of  the  board  of  directors  of  such  company,  or  of  the 
executive  committee  of  such  board,  if  any,  and  accepted  and 
approved  by  the  vote  of  a  majority  of  those  present  constitut- 
ing a  quorum. 

Section  18  of  the  Trust  Company  Law  provides  that  no 
trust  company  shall  make  any  loan  on  the  security  of  the 
shares  of  its  own  capital  stock,  nor  be  the  purchaser  or  holder 
of  any  such  shares  unless  such  security  or  purchase  shall  be 
necessary  to  prevent  loss  upon  a  debt  previously  contracted 
in  good  faith ;  and  stock  so  purchased  or  acquired  shall  within 
one  year  from  the  time  of  its  purchase  be  sold  or  disposed  of 
at  public  or  private  sale ;  provided,  that  nothing  in  this  sec- 


NEW   JERSEY.  179 

tion  contained  shall  apply    to    any    loan    made    before    the 
passage  of  this  act. 

Personal   Securities. 

It  is  well  settled  that  trustees  render  themselves  liable  for  loss 
if  £hey  loan  funds  on  mere  personal  security.  Brewster  v.  Demarest, 
48  N.  J.  Eq.  559;  Sherman  v.  Lanier,  39  N.  J.  Eq.  249;  Gray  v.  Fox,  1 
N.  J.  Eq.  259;  Vreeland  v.  Vreeland's  Adm'r.,  16  N.  J.  Eq.  512,  530. 

Stock  of  Private  Companies. 

Investment  in  the  stock  of  private  corporations  is  not  considered 
safe.  Gray  v.  Fox,  1  N.  J.  Eq.  259. 

When  the  direction  is  to  invest  in  ' '  bonds  and  mortgages,  or  in 
productive  stocks,"  the  trustee  must  invest  in  bonds  and  mortgages, 
and  if  these  cannot  be  obtained,  in  stocks  or  bonds  of  this  state  or 
the  United  States  or  in  railroad  bonds  authorized  by  statute. 

May  Not  Purchase  Property. 

Trust  money  may  not  be  invested  in  the  purchase  of  real  estate. 
Quicks  Exr's.  v.  Fisher,  9  N.  J.  Eq.  802. 

Trustee  May  Not  Purchase  His  Own  Property  as  an  Investment. 

A  trustee,  although  authorized  by  the  will  to  purchase  real  estate 
as  an  investment,  may  not  sell  his  own  property  to  the  estate.  Holcomb 
v.  Holcomb 's  Ex'rs.,  11  N.  J.  Eq.  281. 

If  the  discretion  given  by  the  will  or  deed,  as  to  investments, 
is  in  general  words,  such  as  "good  security,"  "stocks,"  "produc- 
tive stocks,"  "public  stocks"  or  "at  discretion,"  without  stating  any 
particular  security  or  stock,  trustees  are  permitted  to  exercise  their  dis- 
cretion only  as  to  the  kind  of  legal  security  which  they  will  select.  It 
does  not  leave  them  free  to  invest  as  they  choose.  Ward  v.  Kitchen,  30 
N.  J.  Eq.  31;  Ashhurst  v.  Potter,  29  N.  J.  Eq.  625. 

Even  a  clause  that  the  trustee  is  not  to  be  liable  or  responsible 
for  any  cause  except  his  own  willful  and  intentional  breach  of  trust 
will  not  exonerate  him.  Gilmore  v.  Tuttle,  32  N.  J.  Eq.  611. 

Mortgage  or  Government  Securities. 

It  is  the  duty  of  trustees  to  invest  upon  bond  and  mortgage  or 
in  the  securities  of  this  state  or  of  the  United  States,  and  the  fund 
must  be  invested,  if  on  mortgages,  at  the  highest  rates  allowed  by 
law,  if  such  investment  can  be  procured,  and,  if  possible,  in  such  a 
way  as  not  to  be  subject  to  taxes.  Lathrop  v.  Smalley's  Ex'rs.,  23  N. 
J.  Eq.  192.  But  the  statutes  now  permit  investments  in  certain  rail- 
road bonds. 


180  STATE   LAWS   AND   DECISIONS. 

Business,   Trade   or  Speculation. 

When  a  trustee  has  invested  funds  in  trade,  business  or  specula- 
tion, he  must  account  for  the  profits  or  pay  compound  interest  at  the 
highest  rate,  at  the  option  of  the  beneficiary.  McKnight's  Ex'rs.  v. 
Walsh,  23  N.  J.  Eq.  136;  affd.,  24  N.  J.  Eq.  498. 

Duty  to  Invest. 

It  is  the  duty  of  a  trustee  to  invest  the  trust  funds  in  legal 
securities,  but  when  he  simply  neglects  to  withdraw  funds  from  a 
business  in  which  they  had  been  invested  by  the  testator,  it  seems 
that  he  cannot  be  made  to  account  for  the  profits  of  the  business. 
McKnight's  Ex'rs.  v.  Walsh,  23  N.  J.  Eq.  136;  affd.,  24  X.  J.  Eq.  498. 

He  must  invest  the  interest  which  he  receives  and  which  is  not 
used.  Voorhees  v.  Stoothoff:,  11  N.  J.  L.  145. 

Continuing  Investments   Made  by  Creator   of   Trust. 

It  is  the  duty  of  a  trustee,  within  a  reasonable  time,  to  call  in 
the  estate  and  convert  the  unauthorized  securities  into  legal  invest- 
ments. Babbitt  v.  Fidelity  Trust  Co.,  72  N.  J.  Eq.  745. 

Retaining  Improper  Investments  amounts  to  the  same  thing  as  mak- 
ing them.  Ashhurst  v.  Potter,  29  N.  J.  Eq.  625. 

But  where  the  trust  instrument  makes  a  specific  bequest  of  stocks, 
the  income  to  be  disposed  of  in  a  certain  manner,  it  is  the  duty  of 
the  trustee  to  retain  such  stocks  unless  a  threatened  depreciation  should 
render  it  prudent  for  him  to  sell.  Ward  v.  Kitchen,  30  N.  J.  Eq.  31. 
But  the  statutes  now  permit  a  trustee  to  continue  investments  which 
have  been  made  by  the  creator  of  the  trust. 

Trustee  May  Not  Have  Individual  Interest  in  Dealings. 

The  rule  that  a  trustee  may  not  make  any  personal  profit  or 
obtain  any  advantages  to  himself  from  the  trust  estate  either  directly 
or  indirectly  by  using  the  trust  money  or  by  purchasing  the  property 
in  his  own  name,  is  well  settled  by  numerous  decisions.  He  may  be 
charged  with  the  amount  used  and  interest  or  be  held  accountable  for 
the  profits.  From  the  early  case  of  Voorhees  v.  Stoothoff,  11  N.  J.  L. 
145,  to  the  recent  decision  in  Hill  v.  Hill,  79  N.  J.  Eq.  521,  this  rule 
has  been  rigidly  enforced. 

When  a  trustee  has  violated  the  trust  by  using  the  funds  in  his 
own  business,  he  is  not  entitled  to  commissions,  and  must  account 
for  the  profits  or  pay  compound  interest  at  the  highest  rates,  at  the 
option  of  the  beneficiary.  McKnight's  Ex'rs.  v.  Walsh,  23  N.  J.  Eq. 
136;  affd.,  24  N.  J.  Eq.  498. 

Improvements. 

Under  order  of  court  a  part  of  the  trust  fund  may  be  used  in  erect- 
ing buildings  on  the  land.  Matthews  v.  Dellicker,  39  N.  J.  Eq.  90. 


NEW   JERSEY.  181 

Six  Months  Allowed,  to  Make  Investments. 

After  the  manner  of  the  Civil  law,  it  seems  that  six  months  should 
be  allowed  for  receipt  and  investment  of  funds.  Voorhees  v.  Stoothoff, 
11  N.  J.  L.  145. 

Second   Mortgages. 

Second  mortgages  are  not  proper  security,  and  the  fact  that  they 
were  taken  merely  as  temporary  investment  and  by  advice  of  counsel 
does  not  protect  the  trustee  from  liability  for  loss.  Gilmore  v.  Tuttle, 
32  N.  J.  Eq.  611;  Mulford  v.  Mulford,  53  Atl.  Eep.  79;  Monroe  v. 
Osborne,  10  Atl.  Eep.  267. 

Must  Invest  in  New  Jersey. 

Ordinarily  the  court  will  not  approve  an  investment  of  the  funds 
outside  of  the  state.  McCullough  v.  McCullough,  44  N.  J.  Eq.  313. 

Even  when  the  trustees  resided  in  another  state  and  the  mort- 
gages which  the  testator  had  held  were  on  property  in  that,  state,  the 
court  decided  that  as  these  mortgages  were  paid  off  the  trustees  should 
reinvest  in  New  Jersey. 

Administrator  Pending  Litigation. 

An  administrator  pendente  lite  should  not  suffer  trust  funds  to  lie 
idle  without  sanction  of  the  orphans'  court,  neither  should  he  mingle 
the  funds  with  his  own  or  use  them  for  his  own  benefit.  If  he  sells 
railroad  stock  and  uses  the  money,  he  will  be  charged  with  the  amount 
he  received  and  for  the  difference  between  that  price  and  the  price 
which  a  prudent  trustee  would  have  received,  together  with  interest 
upon  the  amount  received  by  him.  Fluck  v.  Lake,  54  N.  J.  Eq.  638. 

Acquiescence  of   Creator  of   Trust. 

Where  a  trustee  invests  funds  in  the  purchase  of  a  farm  with  the 
acquiescence  of  the  creator  of  the  trust,  he  is  not  personally  liable. 
James  v.  Aller,  66  N.  J.  Eq.  69. 

Creation  of  Trust. 

Although  the  creation  of  a  trust  is  usually  by  will  or  deed  or  order 
of  court,  it  may  arise  where  one  has  placed  confidence  in  another  for 
a  long  time,  and  has  allowed  him  complete  control  of  affairs.  In  such 
a  case,  the  strict  rules  applicable  to  investment  of  funds  apply. 
Wieters  v.  Hart,  67  N.  J.  Eq.  507. 

Municipal  Bonds   and  Bank  Stock. 

An  executor  has  no  authority  to  invest  any  part  of  the  estate  in 
municipal  bonds  or  bank  stock.  Tucker  v.  Tucker,  33  N.  J.  Eq.  235. 
But  the  right  to  invest  in  municipal  bonds  is  now  given  by  Statute. 


182  STATE   LAWS   AND   DECISIONS. 

Protected  "by  Order  of  Court. 

Trustees  may  obtain  the  direction  of  the  orphans'  court  as  to 
investments  and  thus  protect  themselves.  Tucker  v.  Tucker,  33  N.  J. 
Eq.  235. 

Interest. 

When  an  executor  receives  the  funds  in  various  sums  from  time 
to  time  and  settles  his  accounts  promptly,  and  could  not  well  make 
permanent  investments,  he  is  not  chargeable  with  interest.  Wyckoff  v. 
O'Neil,  71  N.  J.  Eq.  729. 

Investing  Cash   Dividends  in  Stock. 

When  trustees  are  given  power  in  the  will  to  continue  investments, 
and  part  of  the  estate  consists  of  stock,  they  are  entitled  to  use  a 
two  hundred  per  cent  cash  dividend  to  purchase  two  new  shares  for 
each  share  they  own,  thus  preserving  the  proportionate  interest  of  the 
estate  in  the  property.  Ballantine  v.  Young,  79  N.  J.  Eq.  70. 

Carrying  on  Business. 

When  a  testator  directs  his  business  to  be  carried  on  by  the 
trustee,  prima  facie,  only  the  fund  employed  in  the  business  is  liable 
for  the  debts  of  subsequent  creditors.  If  the  estate  is  to  be  liable  gen- 
erally, the  intention  must  clearly  appear  in  the  will.  Laible  v.  Ferry, 
32  N.  J.  Eq.  791. 


NEW    MEXICO. 

Statutes     of    1897. 
(With    Amendments   to    1914.) 

Sec.  1453.  Guardians. — If,  at  any  time,  any  guardian 
shall  have  on  hand  any  money  belonging  to  his  ward  beyond 
what  may  be  necessary  for  his  education  and  maintenance, 
such  •  guardian  shall,  under  the  direction  of  the  court,  loan 
the  same  to  such  persons  as  will  give  good  security  therefor, 
and  such  money  shall  be  loaned  on  such  time  as  the  court 
shall  direct. 

Sec.  1454.  If  any  guardian  fail  to  loan  the  money  of 
his  ward  on  hand  as  aforesaid,  under  the  provisions  of  this 
act,  he  shall  be  accountable  for  the  interest  thereon. 

Trust  Companies. — By  the  laws  of  1903,  Ch.  52,  Section  8, 
trust  companies  are  prohibited  from  making  loans  on  their 
own  capital  stock  as  security.  But  there  are  no  specific  pro- 
visions regarding  investment  of  trust  funds. 

General  Principles  Applicable. 

The  Statutes  and  decisions  in  New  Mexico  being  few,  a  trustee 
should  observe  the  general  principles  discussed  in  Part  I. 

Deposit  in  Bank  to  Personal  Credit. 

A  trustee  who  deposits  trust  funds  in  bank  to  his  own  credit  is 
liable,  especially  when  it  is  evident  that  he  intended  to  use  the  money. 
Perea  v.  Harrison,  7  New  Mex.  666. 

Good  Faith  Required. 

The  law  requires  the  utmost  good  faith  and  diligence  of  trustees. 
They  will  not  be  permitted  to  derive  any  personal  advantage  from  the 
trust.  Perea  v.  Borela,  5  New  Mex.  458. 


183 


NEW    YORK.* 

TRUSTEES    GENERALLY. 

Personal    Property    Law,    Section    21. 

A  trustee  or  other  person  holding  trust  funds  for  invest- 
ment may  invest  the  same  in  the  same  kind  of  securities  as 
those  in  which  savings  banks  of  this  State  are  by  law  au- 
thorized to  invest  the  money  deposited  therein,  and  the  in- 
come derived  therefrom,  and  in  bonds  and  mortgages  on  un- 
encumbered real  property  in  this  State  worth  fifty  per  centum 
more  than  the  amount  loaned  thereon.  A  trustee  or  other 
person  holding  trust  funds  may  require  such  personal  bonds 
or  guaranties  of  payment  to  accompany  investments  as  may 
seem  prudent,  and  all  premiums  paid  on  such  guaranties  may 
be  charged  to  or  paid  out  of  income,  providing  that  such 
charge  or  payment  be  not  more  than  at  the  rate  of  one-half 
of  one  per  centum  per  annum  on  the  par  value  of  such  invest- 
ments. But  no  trustee  shall  purchase  securities  hereunder 
from  himself. 

TRUST    COMPANIES. 
Banking    Law    of    1914. 

Investment  of  Trust  Funds. — All  investments  of  money  re- 
ceived by  any  such  corporation,  and  by  any  trust  company 
chartered  by  special  act,  prior  to  May  18,  1892,  as  executor, 
administrator,  guardian,  personal  or  testamentary  trustee,  re- 
ceiver, committee  or  depositary,  shall  be  at  its  sole  risk,  and 
for  all  losses  of  such  money  the  capital  stock,  property  and 
effects  of  the  corporation  shall  be  absolutely  liable,  unless  the 
investments  are  such  as  are  proper  when  made  by  an  indi- 
vidual acting  as  trustee,  executor,  administrator,  guardian,  re- 
ceiver, committee,  depositary,  or  such  as  are  permitted  in  and 
by  the  instrument  or  words  creating  or  defining  the  trust. 


For  list  of  legal  investments  in  New  York  see  Part  III. 

184 


NEW  YORK.  185 

Interest. — On  all  sums  of  money  not  less  than  one  hundred 
dollars,  which  shall  be  collected  and  received  by  a  trust  com- 
pany acting  as  executor,  administrator,  guardian,  trustee,  re- 
ceiver or  committee  under  the  appointment  of  any  court  or 
officer,  or  in  any  fiduciary  capacity  under  such  appointment, 
or  as  a  depositary  of  moneys  paid  into  court,  interest  shall 
be  allowed  by  such  trust  company  at  not  less  than  the  rate  of 
two  per  centum  per  annum  until  the  moneys  so  received  shall 
be  duly  expended  or  distributed.  If  such  interest  moneys,  or 
any  part  thereof,  shall  not  annually  be  expended  or  dis- 
tributed pursuant  to  the  terms  or  provisions  of  the  trust  under 
which  such  moneys  are  held,  the  amount  thereof  not  so  ex- 
pended or  distributed  shall  be  accumulated  by  such  trust  com- 
pany for  the  benefit  of  the  parties  interested  in  such  trust 
fund,  and  shall  be  added  to  the  principal  to  constitute  a  new 
principal  upon  which  interest  shall  thereafter  be  computed. 

SAVINGS    BANKS. 

Since  all  trustees  may  invest  in  securities  which  are  legal 
for  savings  banks,  it  is  necessary  to  set  forth  the  provisions 
of  the  new  banking  law  relating  to  investments  by  such  banks. 

Investments  of  deposits  and  guaranty  fund  and  restrictions 
thereon. 

A  savings  bank  may  invest  the  moneys  deposited  therein, 
the  sums  credited  to  the  guaranty  fund  thereof  and  the  in- 
come derived  therefrom,  in  the  following  property  and  securi- 
ties and  no  others;  and  subject  to  the  following  restrictions: 

1.  The  stocks  or  bonds  or  interest-bearing  notes  or  obli- 
gations of  the  United  States,  or  those  for  which  the  faith  of 
the  United  States  is  pledged  to  provide  for  the  payment  of 
the  interest  and  principal,  including  the  bonds  of  the  District 
of  Columbia. 

2.  The  stocks  or  bonds  or  interest-bearing  obligations  of 
this  state,  issued  pursuant  to  the  authority  of  any  law  of  the 
state. 

3.  The   stocks,   bonds   or   interest-bearing    obligations    of 


186  STATE   LAWS   AND   DECISIONS. 

any  state  of  the  United  States,  upon  which  there  is  no  de- 
fault and  upon  which  there  has  been  no  default  for  more 
than  ninety  days;  provided  that  within  ten  years  immediately 
preceding  the  investment  such  state  has  not  been  in  default 
for  more  than  ninety  days  in  the  payment  of  any  part  of 
principal  or  interest  of  any  debt  duly  authorized  by  the  legis- 
lature of  such  state  to  be  contracted  by  such  state  since  the 
first  day  of  January,  eighteen  hundred  and  seventy-eight. 

4.  The    stocks,    bonds,    interest-bearing     obligations,    or 
revenue  notes  sold  at  a  discount,  of  any  city,  county,  town, 
village,  school  district,  union  free  school  district  or  poor  dis- 
trict in  this  state,  provided  that  they  were  issued  pursuant 
to  law  and  that  the  faith  and  credit  of  the  municipality  or 
district  that   issued  them  are   pledged  for  their   payment. 

5.  The  stocks  or  bonds  of  any  incorporated  city  situated 
in  one  of  the  states  of  the  United  States  which  was  admitted 
to   statehood  prior   to   January   first,    eighteen   hundred   and 
ninety-six,  and  which  since  January  first,  eighteen  hundred 
and  sixty-one,  has  not  repudiated  or  defaulted  in  the   pay- 
ment of  any  part  of  the  principal  or  interest  of  any   debt 
authorized  by  the  legislature  of  any  such  state   to  be   con- 
tracted, provided  said  city  has  a  population,  as  shown  by  the 
federal  census  next  preceding  said   investment,   of  not   less 
than  forty-five  thousand  inhabitants,  and  was  incorporated  as 
a  city  at  least  twenty-five  years  prior  to  the  making  of  said 
investment,  and  has  not,  since  January  first,  eighteen  hundred 
seventy-eight,  defaulted  for  more  than  ninety  days  in  the  pay- 
ment of  any  part  either  of  principal  or  interest  of  any  bond, 
note  or  other  evidence  of  indebtedness,  or  effected  any  com- 
promise of  any  kind  with  the  holders  thereof.     But  if,  after 
such  default  on  the  part  of  any  such  state  or  city,  the  debt 
or  security,  in  the  payment  of  the  principal  or  interest  of 
which  such  default  occurred,  has  been  fully  paid,  refunded 
or  compromised,  by  the  issue  of  new  securities,  then  the  date 
of  the  first  failure  to  pay  principal   or  interest,  when  due, 
upon  such  debt  or  security,  shall  be  taken  to  be  the  date  of 
such  default,  within  the  provisions  of  this  subdivision,  and 
subsequent   failures  to   pay  installments   of   principal   or   in- 


NEW  YORK.  187 

terest,  upon  such  debt  or  security,  prior  to  the  refunding 
or  final  payment  of  the  same,  shall  not  be  held  to  continue 
said  default  or  to  fix  the  time  thereof,  within  the  meaning 
of  this  subdivision,  at  a  date  later  than  the  date  of  said  first 
failure  in  payment.  If  at  any  time  the  indebtedness  of  any 
such  city,  together  with  the  indebtedness  of  any  district,  or 
other  municipal  corporation  or  subdivision  except  a  county, 
which  is  wholly  or  in  part  included  within  the  bounds  or 
limits  of  said  city,  less  its  water  debt  and  sinking  fund,  shall 
exceed  seven  per  centum  of  the  valuation  of  said  city  for  pur- 
poses of  taxation,  its  bonds  and  stocks  shall  thereafter,  and 
until  such  indebtedness  shall  be  reduced  to  seven  per  centum 
of  the  valuation  for  the  purposes  of  taxation,  cease  to  be  an 
authorized  investment  for  the  moneys  of  savings  banks. 

6.  Bonds  and  mortgages  on  unincumbered  real  property 
situated  in  this  state,  to  the  extent  of  sixty  per  centum  of  the 
appraised  value  thereof.    Not  more  than  sixty-five  per  centum 
of  the  whole  amount  of  deposits  and  guaranty  fund  shall  be 
so  loaned  or  invested.     If  the  loan  is  on  unimproved  and  un- 
productive real  property,  the  amount  loaned  thereon  shall  not 
be  more  than  forty  per  centum  of  its  appraised  value.    No  in- 
vestment in  any  bonds  and  mortgages  shall  be  made  by  any 
savings  bank  except  upon  the  report  of  a  committee  of  its 
trustees  charged  with  the  duty  of  investigating  the  same,  who 
shall  certify  to  the  value  of  the  premises  mortgaged  or  to  be 
mortgaged,  according  to  their  judgment,  and  such  report  shall 
be  filed  and  preserved  among  the  records  of  the  corporation. 

7.  The  following  bonds  of  railroad  corporations : 

(a)  The  first  mortgage  bonds  of  any  railroad  corpora- 
tion of  this  state,  the  principal  part  of  whose  railroad  is 
located  within  this  state,  or  of  any  railroad  corporation  of 
this  or  any  other  state  or  states  connecting  with  and  con- 
trolled and  operated  as  a  part  of  the  system  of  any  such 
railroad  corporation  of  this  state,  and  of  which  connecting 
railroad  at  least  a  majority  of  its  capital  stock  is  owned  by 
such  a  railroad  corporation  of  this  state  or  in  the  mortgage 
bonds  of  any  such  railroad  corporation  of  an  issue  to  retire 
all  prior  mortgage  debt  of  such  railroad  companies  respec-. 


188  STATE   LAWS   AND   DECISIONS. 

tively;  provided  that  at  no  time  within  five  years  next  pre- 
ceding the  date  of  any  such  investment,  such  railroad  corpora- 
tion of  this  state  or  such  connecting  railroad  corporation 
respectively  shall  have  failed  regularly  and  punctually  to  pay 
the  matured  principal  and  interest  of  all  its  mortgage  indebt- 
edness, and  in  addition  thereto  regularly  and  punctually  to 
have  paid  in  dividends  to  its  stockholders  during  each  of  said 
five  years  an  amount  at  least  equal  to  four  per  centum  upon 
all  its  outstanding  capital  stock;  and  provided,  further,  that 
at  the  date  of  every  such  dividend  the  outstanding  capital 
stock  of  such  railroad  corporation  or  such  connecting  rail- 
road company  respectively  shall  have  been  equal  to  at  least 
one-third  of  the  total  mortgage  indebtedness  of  such  railroad 
corporations  respectively,  including  all  bonds  issued  or  to 
be  issued  under  any  mortgage  securing  any  bonds  in  which 
such  investment  shall  be  made. 

(b)  The  mortgage  bonds  of  the  following  railroad  cor- 
porations: The  Chicago  &  Northwestern  railroad  company; 
Chicago,  Burlington  and  Quincy  railroad  company,  Michigan 
Central  railroad  company,  Illinois  Central  railroad  company, 
Pennsylvania  railroad  company,  Delaware  and  Hudson  com- 
pany, Delaware,  Lackawanna  and  Western  railroad  company, 
New  York,  New  Haven  and  Hartford  railroad  company,  Bos- 
ton and  Maine  railroad  company,  Maine  Central  railroad  com- 
pany, the  Chicago  and  Alton  railroad  company,  Morris  and 
Essex  railroad  company,  Central  railroad  of  New  Jersey, 
United  New  Jersey  railroad  and  canal  company,  also  in  the 
mortgage  bonds  of  railroad  companies  whose  lines  are  leased 
or  operated  or  controlled  by  any  railroad  company  specified 
in  this  paragraph  if  said  bonds  be  guaranteed  both  as  to 
principal  and  interest  by  the  railroad  company  to  which  said 
lines  are  leased  or  by  which  they  are  operated  or  controlled. 
Provided  that  at  the  time  of  making  investments  authorized 
by  this  paragraph  the  said  railroad  corporations  issuing  such 
bonds  shall  have  earned  and  paid  regular  dividends  of  not 
less  than  four  per  centum  per  annum  in  cash  on  all  their 
issues  of  capital  stock  for  the  ten  years  next  preceding  such 
investment,  and  provided  the  capital  stock  of  any  said  rail- 


NEW  YORK.  189 

road  corporations  shall  equal  or  exceed  in  amount  one-third 
of  the  par  value  of  all  its  bonded  indebtedness;  and  further 
provided  that  all  bonds  authorized  for  investment  by  this 
paragraph  shall  be  secured  by  a  mortgage  which  is  a  first 
mortgage  on  either  the  whole  or  some  part  of  the  railroad  and 
railroad  property  of  the  company  issuing  such  bonds,  or  that 
such  bonds  shall  be  mortgage  bonds  of  an  issue  to  retire  all 
prior  mortgage  debts  of  such  railroad  company;  provided, 
further,  that  the  mortgage  which  secures  the  bonds  author- 
ized by  this  paragraph  is  dated,  executed  and  recorded  prior 
to  January  first,  nineteen  hundred  and  five. 

(c)  The  mortgage  bonds  of  the  Chicago,  Milwaukee  and 
Saint  Paul  railway  company,  and  the  Chicago,  Rock  Island  and 
Pacific  railway  company,  so  long  as  they  shall  continue  to 
earn  and  pay  at  least  four  per  centum  dividends  per  annum 
on  their  outstanding  capital  stock,  and  provided  their  capital 
stock  shall  equal  or  exceed  in  amount  one-third  of  the  par 
value  of  all  their  bonded  indebtedness,  and  further  -provided 
that  all  bonds  of  either  of  said  companies  hereby  authorized 
for  investment  shall  be  secured  by  a  mortgage  which  is  a  first 
mortgage  on  either  the  whole  or  some  part  of  the  railroad 
or  railroad  property  actually  in  the  possession  of  and  operated 
by  said  company,  or  that  such  bonds  shall  be  mortgage  bonds 
of  an  issue  to  retire  all  prior  debts  of  said  railroad  company; 
provided,  further,  that  the  mortgage  which  secures  the  bonds 
authorized  by  this  paragraph  is  dated,  executed  and  recorded 
prior  to  January  first,  nineteen  hundred  and  five. 

(d)  The  first  mortgage  bonds  of  the  Fonda,  Johnstown 
and  Gloversville  railroad  company,  or  in  the  mortgage  bonds 
of  said  railroad  company  of  an  issue  to  retire  all  prior  mort- 
gage debts  of  said  railroad  company,  and  provided  the  capital 
stock  of  said  railroad  company    shall    equal    or    exceed    in 
amount  one-third  of  the  par  value  of  all  its  bonded  indebted- 
ness, and  provided  also  that  such  railroad  be  the  standard 
gauge  of  four  feet  eight  and  one-half  inches,  and  in  the  mort- 
gage bonds  of  the  Buffalo  Creek  railroad  company  of  an  issue 
to  retire  all  prior  mortgage  debts  of  said  railroad  company, 
provided  that  the  bonds  authorized  by  this  paragraph  are  se- 


190  STATE   LAWS   AND   DECISIONS. 

cured  by  a  mortgage  dated,  executed  and  recorded  prior  to 
January  first,  nineteen  hundred  and  five. 

(e)  The  mortgage  bonds  of  any  railroad  corporation 
incorporated  under  the  laws  of  any  of  the  United  States, 
which  actually  owns  in  fee  not  less  than  five  hundred  miles 
of  standard  gauge  railway  exclusive  of  siding,  within  the 
United  States,  provided  that  at  no  time  within  five  years 
next  preceding  the  date  of  any  such  investment  such  rail- 
road corporation  shall  have  failed  regularly  and  punctually 
to  pay  the  matured  principal  and  interest  of  all  its  mort- 
gage indebtedness  and  in  addition  thereto  regularly  and 
punctually  to  have  paid  in  dividends  to  its  stockholders  dur- 
ing each  of  said  five  years  an  amount  at  least  equal  to  four 
per  centum  upon  all  its  outstanding  capital  stock;  and  pro- 
vided further  that  during  said  five  years  the  gross  earnings 
in  each  year  from  the  operations  of  said  company,  including 
therein  the  gross  earnings  of  all  railroads  leased  and  operated 
or  controlled  and  operated  by  said  company,  and  also  includ- 
ing in  said  earnings  the  amount  received  directly  or  indi- 
rectly by  said  company  from  the  sale  of  coal  from  mines 
owned  or  controlled  by  it,  shall  not  have  been  less  in  amount 
than  five  times  the  amount  necessary  to  pay  the  interest 
payable  during  that  year  upon  its  entire  outstanding  indebt- 
edness, and  the  rentals  for  said  year  of  all  leased  lines,  and 
further  provided  that  all  bonds  authorized  for  investment  by 
this  paragraph  shall  be  secured  by  a  mortgage  which  is  at  the 
time  of  making  said  investment  or  was  at  the  date  of  the, 
execution  of  said  mortgage  (1)  a  first  mortgage  upon  not 
less  than  seventy-five  per  centum  of  the  railway  owned  in  fee 
by  the  company  issuing  said  bonds  exclusive  of  sidings  at  the 
date  of  said  mortgage  or  (2)  a  refunding  mortgage  issued  to 
retire  all  prior  lien  mortgage  debts  of  said  company  out- 
standing at  the  time  of  said  investment  and  covering  at  least 
seventy-five  per  centum  of  the  railway  owned  in  fee  by  said 
company  at  the  date  of  said  mortgage.  But  no  one  of  the 
bonds  so  secured  shall  be  a  legal  investment  in  case  the 
mortgage  securing  the  same  shall  authorize  a  total  issue  of 
bonds  which  together  with  all  outstanding  prior  debts  of  said 


NEW   YORK.  191 

company,  after  deducting  therefrom  in  case  of  a  refunding 
mortgage,  the  bonds  reserved  under  the  provisions  of  said 
mortgage  to  retire  prior  debts  at  maturity,  shall  exceed  three 
times  the  outstanding  capital  stock  of  said  company  at  the 
time  of  making  said  investment.  And  no  mortgage  is  to 
be  regarded  as  a  refunding  mortgage,  under  the  provisions 
of  this  paragraph,  unless  the  bonds  which  it  secures  mature 
at  a  later  date  than  any  bond  which  it  is  given  to  refund, 
nor  unless  it  covers  a  mileage  at  least  twenty-five  per  centum 
greater  than  is  covered  by  any  one  of  the  prior  mortgages  so 
to  be  refunded. 

(f)  Any    railway    mortgage    bonds    which    would    be    a 
legal  investment  under  the   provisions  of  paragraph    (e)    of 
this  subdivision,  except  for  the  fact   that  the   railroad  cor- 
poration issuing  said  bonds   actually  owns  in  fee   less  than 
five  hundred  miles  of  road,  provided  that  during  five  years 
next  preceding  the   date   of  any  such  investment   the   gross 
earnings  in  each  year  from  the   operations  of  said  corpora- 
tion,  including   the    gross    earnings   of    all   lines    leased   and 
operated  or  controlled  and  operated  by  it,  shall  not  have  been 
less  than  ten  million  dollars. 

(g)  The   mortgage   bonds  of  a  railroad  corporation  de- 
scribed in  the  foregoing  paragraph   (e)    or   (f)   or  the  mort- 
gage bond  of  a  railroad  owned  by  such  corporation,  assumed 
or  guaranteed  by  it  by  endorsement  on  said  bonds,  provided 
said  bonds  are  prior  to  and  are  to  be  refunded  by  a  general 
mortgage  of  said  corporation  the  bonds  secured  by  which  are 
made  a  legal  investment  under  the  provisions  of  said  para- 
graph  (e)    or    (f)  ;   and  provided,   further,  that  said  general 
mortgage  covers  all  the  real  property  upon  which  the  mort- 
gage securing  said  underlying  bonds  is  a  lien. 

(h)  Any  railway  mortgage  bonds  which  would  be  a 
legal  investment  under  the  provisions  of  paragraph  (e)  or  (g) 
of  this  subdivision  except  for  the  fact  that  the  railroad  cor- 
poration issuing  said  bonds  actually  owns  in  fee  less  than  five 
hundred  miles  of  road,  provided  the  payment  of  principal 
and  interest  of  said  bonds  is  guaranteed  by  endorsement 
thereon  by,  or  provided  said  bonds  have  been  assumed  by  a 


192  STATE   LAWS   AND   DECISIONS. 

corporation  whose  first  mortgage  is,  or  refunding  mortgage 
bonds  are,  a  legal  investment  under  the  provisions  of  para- 
graph (e)  or  (f )  of  this  subdivision.  But  no  one  of  the  bonds 
so  guaranteed  or  assumed  shall  be  a  legal  investment  in  case 
the  mortgage  securing  the  same  shall  authorize  a  total  issue 
of  bonds  which,  together  with  all  the  outstanding  prior  debts 
of  the  corporation  making  said  guarantee  or  so  assuming  said 
bonds,  including  therein  the  authorized  amount  of  all  pre- 
viously guaranteed  or  assumed  bond  issues,  shall  exceed  three 
times  the  capital  stock  of  said  corporation,  at  the  time  of 
making  said  investment. 

(i)  The  first  mortgage  bonds  of  a  railroad  the  entire 
capital  stock  of  which,  except  shares  necessary  to  qualify 
directors,  is  owned  by,  and  which  is  operated  by  a  railroad 
whose  last  issued  refunding  bonds  are  a  legal  investment 
under  the  provisions  of  paragraph  (a),  (e),  or  (f)  of  this  sub- 
division, provided  the  payment  of  principal  and  interest  of 
said  bonds  is  guaranteed  by  endorsement  thereon  by  the  com- 
pany so  owning  and  operating  said  road,  and  further  pro- 
vided the  mortgage  securing  said  bonds  does  not  authorize  an 
issue  of  more  than  twenty  thousand  dollars  in  bonds  for  each 
mile  of  road  covered  thereby.  But  no  one  of  the  bonds  so 
guaranteed  shall  be  a  legal  investment  in  case  the  mortgage 
securing  the  same  shall  authorize  a  total  issue  of  bonds  which 
together  with  all  the  outstanding  prior  debts  of  the  company 
making  said  guarantee,  including  therein  the  authorized 
amount  of  all  previously  guaranteed  bond  issues,  shall  ex- 
ceed three  times  the  capital  stock  of  said  company,  at  the  time 
of  making  said  investment. 

Bonds  which  have  been  or  shall  become  legal  invest- 
ments for  savings  banks  under  any  of  the  provisions  of  this 
section  shall  not  be  rendered  illegal  as  investments,  though 
the  property  upon  which  they  are  secured  has  been  or  shall  be 
conveyed  to  another  corporation,  and  though  the  railroad 
corporation  which  issued  or  assumed  said  bond  has  been  or 
shall  be  consolidated  with  another  railroad  corporation,  if 
the  consolidated  or  purchasing  corporation  shall  assume  the 
payment  of  said  bonds  and  shall  continue  to  pay  regularly 


NEW   YORK.  193 

interest  or  dividend  or  both  upon  the  securities  issued 
against,  in  exchange  for  or  to  acquire  the  stock  of  the  com- 
pany consolidated  or  the  property  purchased  or  upon  securi- 
ties subsequently  issued  in  exchange  or  substitution  therefor 
to  an  amount  at  least  equal  to  four  per  centum  per  annum 
upon  the  capital  stock  outstanding  at  the  time  of  such  con- 
solidation or  purchase  of  said  corporation  which  has  issued 
or  assumed  such  bonds. 

Not  more  than  twenty-five  per  centum  of  the  assets  of 
any  savings  bank  shall  be  loaned  or  invested  in  railroad 
bonds,  and  not  more  than  ten  per  centum  of  the  assets  of 
any  savings  bank  shall  be  invested  in  the  bonds  of  any  one 
railroad  corporation  described  in  paragraph  (a)  of  this  sub- 
division, and  not  more  than  five  per  centum  of  such  assets 
in  the  bonds  of  any  other  railroad  corporation.  In  deter- 
mining the  amount  of  the  assets  of  any  savings  bank  under 
the  provisions  of  this  subdivision  its  securities  shall  be  esti- 
mated in  the  manner  prescribed  for  determining  the  per 
centum  of  par  value  surplus  by  section  [257]  of  this  article. 

Street  railroad  corporations  shall  not  be  considered  rail- 
road corporations  within  the  meaning  of  this  subdivision. 

8.  Promissory  notes  payable  to  the  order  of  the  savings 
bank  upon  demand,  secured  by  the  pledge  and  assignment,  if 
necessary,  of  the  stocks  or  bonds  or  any  of  them  enumerated 
in  subdivision  one,  two,  three,  four  and  five  of  this  section 
or  by  the  railroad  bonds  or  any  of  them  mentioned  and  de- 
scribed in  subdivision  seven  of  this  section,  but  no  such  loan 
shall  exceed  ninety  per  centum  of  the  cash  market  value  of 
such  securities  so  pledged.     Should  any  of  the  securities  so 
held  in  pledge  depreciate  in  value  after  the  making  of  such 
loan,  the  savings  bank  shall  require  an  immediate  payment 
of  such  loan  or  of  a  part  thereof  or  additional  security  there- 
for, so  that  the  amount  loaned  thereon  shall  at  no  time  ex- 
ceed ninety  per  centum  of  the  market  value  of  the  securities 
so  pledged  for  such  loan. 

9.  Real  estate  as  follows : 

(a)  A  plot  whereon  there  is  or  may  be  erected  a  building 
or  buildings  suitable  for  the  convenient  transaction  of  the  busi- 


194  STATE   LAWS   AND   DECISIONS. 

ness  of  the  savings  bank,  from  portions  of  which  not  required 
for  its  own  use  a  revenue  may  be  derived. 

(b)  Such  as  shall  be  conveyed  to  it  in  satisfaction  of  debts 
previously  contracted  in  the  course  of  its  business. 

(c)  Such  as  it  shall  purchase  at  sales  under  judgments, 
decrees  or  mortgages  held  by  it. 

The  trustees  of  a  savings  bank  shall  not  be  held  liable  for 
investing  in  state  or  municipal  bonds  named  in  the  last  list 
furnished  by  the  Superintendent  of  Banks  pursuant  to  section 
[52]  of  article  two  of  this  chapter,  or  in  any  railroad  bonds 
mentioned  in  such  list,  which  have  been  legally  issued  and 
properly  executed,  unless  such  savings  bank  shall  have  been 
notified  by  the  Superintendent  of  Banks  that,  in  his  judg- 
ment, such  bonds  do  not  conform  or  have  ceased  to  conform 
to  the  provisions  of  this  section. 

Deposit  in  Bank. 

Trust  funds  may  not  be  kept  on  deposit  in  a  bank  for  a  longer 
period  than  is  reasonable  while  a  proper  investment  is  being  obtained. 
Matter  of  Wotton,  59  A.  D.  584;  aff'd.,  167  X.  Y.  629;  Matter  of 
Knight,  21  Abb.  N.  C.  388. 

But  a  small  fund  may  be  deposited  in  a  savings  bank.  In  re  Wiley, 
98  A.  D.  93. 

Personal  Security. 

It  is  clear,  both  from  the  wording  of  the  statutes  and  from  the 
decisions,  that  a  trustee  may  not  invest  trust  funds  in  personal  securi- 
ties. King  v.  Talbot,  40  N.  Y.  90;  Wilmerding  v.  McKesson,  103 
N.  Y.  336;  Deobold  v.  Opperman,  111  N.  Y.  531. 

Whether  Section  8,  of  the  Savings  Bank  Law,  above  quoted,  changes 
this  rule  is  a  question.  The  section  being  new  has  not  yet  been  con- 
strued, but  it  will  probably  be  held  to  apply  only  to  savings  banks. 

Speculations   or   Business  Ventures. 

Trust  funds  may  not  be  employed  in  speculations  or  business  ven- 
tures. In  re  Hirseh's  Estate,  116  A.  D.  367;  aff'd.,  188  N.  Y.  584;  Deo- 
bold v.  Opperman,  111  N.  Y.  538;  Moore  v.  American  Loan  &  Trust 
Company,  115  N.  Y.  65;  King  v.  Talbot,  40  X.  Y.  76. 

Continuing  Business   of   Creator  of   Trust. 

A  trustee  may  not  continue  the  business  of  the  creator  of  the 
trust,  unless  he  is  expressly  authorized  so  to  do  by  the  trust  instru- 
ment. Wilmerding  v.  McKesson,  103  X.  Y.  329;  Matter  of  Myers,  131 


NEW   YORK.  195 

N.  Y.  409;  Warren  v.  Union  Bank  of  Eochester,  157  N.  Y.  259,  268; 
Saperstein  v.  Ullman,  49  A.  D.  446;  Matter  of  McCollum,  80  A.  D. 
362;  Farrelly  v.  Schaettler,  121  A.  D.  678. 

Even  when  the  power  to  continue  a  business  is  conferred  by  the 
trust  instrument  it  is  strictly  construed.  Willis  v.  Sharp,  113  N.  Y. 
586;  Miller  V.  King,  168  N.  Y.  635;  Thorn  v.  De  Breteuil,  179  N.  Y.  78; 
Matter  of  Bannin,  142  A.  D.  436. 

Corporate   Stocks  and  Bonds. 

Except  as  specifically  authorized  by  the  statute,  a  trustee  may 
not  invest  trust  funds  in  corporate  stocks  arid  bonds.  Hogan  v.  De 
Peyster,  20  Barb.  100;  Mills  v.  Hoffman,  26  Hun.  594;  King  v.  Talbot, 
40  N.  Y.  76;  Matter  of  Wotton,  59  A.  D.  584;  aff'd.,  167  N.  Y.  629; 
Matter  of  Douglas,  60  A.  D.  64;  Matter  of  Hall,  164  N.  Y.  196. 

Continuing  Investments  Made   by  Creator   of   Trust. 

Although  a  few  of  the  early  New  York  decisions  protected  a 
trustee  who  continued  investments  made  by  the  creator  of  the  trust, 
it  seems  to  be  now, well  settled  that  a  trustee  should  not  continue  such 
investments,  if  the  trust  instrument  does  not  authorize  it  and  if  the 
investments  are  not  sanctioned  by  law.  Goodwin  v.  Howe,  62  How.  Pr. 
134;  Mills  v.  Hoffman,  26  Hun.  594;  Matter  of  Weston,  91  N.  Y.  502; 
Matter  of  N.  Y.  Life  Ins.  Co.,  86  A.  D.  247;  Matter  of  Wotton,  59 
A.  D.  584;  aff'd.,  167  N.  Y.  629;  Matter  of  Avery,  45  Misc.  529,  549; 
Matter  of  Burr,  48  Misc.  56,  74;  Toronto  Trust  Co.  v.  C.  B.  &  Q.  Ey. 
Co.,  64  Hun.  1;  aff'd.,  138  N.  Y.  657;  Matter  of  Douglas,  60  A.  D.  64; 
Matter  of  Myers,  131  N.  Y.  409;  Matter  of  Hirsch's  Estate,  116  A.  D. 
367;  aff'd.,  188  N.  Y.  584;  Cannon  v.  Quincy,  65  Misc.  399. 

There  seems  to  be  one  comparatively  recent  contrary  decision 
(Matter  of  Krisfeldt,  49  Misc.  26),  but  this  case  stands  alone  against 
the  decided  weight  of  authority. 

Time  Allowed  for  Disposing  of  Unauthorized  Investments. 

As  a  general  rule,  a  trustee  should  convert  unauthorized  invest- 
ments into  legal  securities  within  a  year.  King  v.  Talbot,  40  N.  Y.  76; 
Matter  of  Douglas,  60  A.  D.  64.  But  a  trustee  is  permitted  to  use  his 
discretion  in  the  matter,  and  may  not  be  liable  for  loss  if  he  retains 
the  investments  for  a  longer  period,  awaiting  a  favorable  market. 
Matter  of  Weston,  91  N.  Y.  502;  Matter  of  Mercantile  Trust  Co.,  156 
A.  D.  224. 

Second  Mortgages. 

The  wording  of  the  statute,  namely,  that  investments  shall  be 
made  in  mortgages  upon  unencumbered  real  property,  clearly  prohibits 
investments  in  second  mortgages.  This  is  the  rule  in  New  York.  Mat- 
ter of  Petrie,  7  St.  Eep.  718. 


196  STATE   LAWS   AND   DECISIONS. 

Investments  Outside  of  the  State. 

An  investment  by  a  trustee  in  securities  which  are  beyond  the 
jurisdiction  of  the  court  will  not  be  upheld,  unless  in  presence  of 
a  clear  and  strong  necessity  or  a  pressing  emergency.  Ormiston  v.  01- 
cott,  84  N.  Y.  339;  Matter  of  Eeed,  45  A.  D.  196. 

Where  a  trustee,  in  selling  land  in  another  state,  was  compelled 
to  take  a  first  mortgage  in  order  to  make  the  sale,  he  was  not  subject 
to  the  strict  rule.  Denton  v.  Sanford,  103  N.  Y.  607. 

But  this  rule  does  not  apply  to  municipal  and  railroad  bonds  which 
are  authorized  by  statute. 

Eight  of  Trustee  to  Erect  New  Buildings. 

As  to  the  right  of  a  trustee  to  make  repairs  and  erect  new  build- 
ings, see  Smith  v.  Keteltas,  62  A.  D.  174. 

Batification  of   Unauthorized  Investment. 

The  beneficiaries  may  elect  to  affirm  or  disaffirm  an  unauthorized 
investment,  and  having  once  elected  they  are  bound.  Hine  v.  Hine,. 
118  A.  D.  585. 


NORTH    CAROLINA. 

TRUSTEES    GENERALLY. 

Statutes    of    1908. 
(With   Amendments   to    1914.) 

Sec.  1792.  Funds  Invested  by  Fiduciaries. — Guardians, 
trustees,  and  others  acting  in  a  fiduciary  capacity,  having  sur- 
plus funds  of  their  wards  and  cestui  que  trustent  to  loan  may 
invest  in  United  States  bonds,  or  any  securities  for  which  the 
United  States  are  responsible,  or  in  consolidated  bonds  of 
the  state  of  North  Carolina,  and  in  settlements  by  guardians, 
trustees  and  others  acting  in  a  fiduciary  capacity,  such  bonds 
or  other  security  of  the  United  States,  and  such  bonds  of  the 
state  of  North  Carolina  shall  be  deemed  cash  to  the  amount 
actually  paid  for  same,  including  the  premium,  if  any,  paid 
for  such  bonds  or  other  securities,  and  may  be  paid  as  such 
by  the  transfer  thereof  to  the  persons  entitled. 

Personal  Security. 

Under  the  Code  as  originally  adopted,  it  seems  that  trustees  had 
the  right  to  invest  in  personal  securities,  provided  the  sureties  on  the 
bond  were  adequate.  Hurdle  v.  Leath,  63  N.  C.  597;  Boyett  v.  Hurst, 
54  N.  C.  166;  Covington  v.  Leak  &  Wall,  65  N.  C.  594.  The  old  section 
was  strictly  construed  and  a  trustee  was  required  to  obtain  a  surety 
no  matter  how  responsible  the  borrower  might  be.  Freeman  v.  Wilson, 
74  N.  C.  368. 

This  was  a  departure  from  the  English  rule  and  gave  the  trustee 
a  wider  range  for  investment.  Whitford  v.  Foy,  65  N.  C.  265. 

A  loan  to  one  member  of  a  firm  with  the  bond  of  a  partner  as 
security  complies  with  the  statute,  for  there  is  a  responsible  person 
"in  addition  to  the  borrower."  Watson  v.  Holton,  115  N.  C.  36. 

But  a  note  signed  by  a  firm  with  one  of  the  members  as  surety 
does  not  comply  with  the  statute.  Boyett  v.  Hurst,  54  N.  .0.  166. 

Although  the  case  of  Watson  v.  Holton  (supra)  was  decided  in 
1894,  we  cannot  harmonize  it  and  the  present  Code,  Section  1792, 

197 


198  STATE    LAWS   AND   DECISIONS. 

which  seems  to  have  been  adopted  in  1885  and  does  not  provide  for 
investment  on  personal  security.  Apparently  the  old  section,  1592,  has 
been  repealed  and  it  would  not  be  safe  now  for  a  trustee  to  invest  in 
such  security. 

In  a  recent  case  where  a  trustee  in  bankruptcy  loaned  funds  to 
a  manufacturing  company  in  which  he  was  interested,  the  investment 
was  declared  wrongful  because  made  without  an  order  of  court.  Cost- 
ner  v.  Cotton  Mills  Co.,  155  N.  C.  128. 

Deposit  in   Bank. 

Certificates  of  deposit  do  not  constitute  legal  investments.  Money 
may  be  deposited  in  bank  for  convenience  in  settling  estates,  but  not 
as  a  permanent  investment.  Collins  v.  Gooch,  97  N.  C.  186.  See  also 
Moore  v.  Eure,  101  N.  C.  11. 

Third   Mortgage. 

A  trustee  who  owned  a  second  mortgage  on  property  invested  trust 
funds  in  a  third  mortgage,  the  money  lent  being  applied  to  the  first 
mortgage.  This  was  clearly  a  breach  of  trust.  McEachern  v.  Stewart, 
114  N.  C.  370. 

May  Not  Obtain  Any  Personal  Advantages  from  the  Estate. 

A  trustee  may  not  purchase  trust  property  at  his  own  sale  or 
obtain  any  personal  advantages  from  his  management  of  the  estate. 
Patton  v.  Thompson,  55  N.  C.  285;  Bruner  v.  Threadgill,  88  X.  C.  361; 
Gibson  v.  Barbour,  100  N.  C.  192;  McEachern  v.  Stewart,  114  X.  C.  370. 

Investment  in  Another  State. 

It  seems  that  the  courts  of  North  Carolina  do  not  approve  of  in- 
vestments of  trust  funds  in  other  states.  Collins  v.  Gooch,  97  N.  C.  186. 

Duty  to  Invest. 

It  is  the  duty  of  a  trustee  to  invest  in  interest-bearing  securities. 
If  he  permits  the  funds  to  lie  idle  he  is  chargeable  with  interest.  Mc- 
Neill  v.  Hodges,  83  N.  C.  504. 

Whenever  balances  accumulate  beyond  the  exigencies  of  the  estate, 
it  is  the  duty  of  an  administrator  to  invest,  unless  he  is  holding  the 
fund  intact,  ready  for  distribution.  Pickens  v.  Miller,  83  N.  C.  543. 

When  an  executor  is  authorized  by  will  to  invest,  he  must  invest 
as  directed.  He  may  not  turn  the  funds  over  to  a  guardian.  Pea- 
cock v.  Harris,  85  N.  C.  146. 

A  guardian  is  chargeable  with  interest  when  he  permits  funds  to 
remain  uninvested.  Wilson  v.  Lineberger,  88  N.  C.  416. 


NORTH   CAROLINA.  199 

Confederate  Notes. 

As  to  investments  in  Confederate  notes  and  the  effect  of  the  war 
upon  the  duties  of  trustees,  see  Whitford  v.  Foy,  65  N.  C.  265;  Sud- 
derth  v.  McCombs,  65  N.  C.  186,  and  Freeman  v.  Wilson,  74  N.  C.  368. 

Failing  Securities. 

"Where  a  trustee  has  notice  that  a  security  in  which  funds  are 
invested  is  bad,  he  must  exercise  due  diligence  in  protecting  the  bene- 
ficiary. Williamson  v.  Williams,  59  N.  C.  62. 


NORTH    DAKOTA. 

Eevised    Code,    1899. 
(With   Amendments   to    1914.) 

.  Sec.  4286.  Investment  of  Trust  Money. — A  trustee  must 
invest  money  received  by  him  under  the  trust  as  fast  as  he 
collects  a  sufficient  amount  in  such  manner  as  to  afford  reason- 
able security  and  interest  for  the  same. 

Sec.  4287.  Liability  for  Failure. — If  the  trustee  omits  to 
invest  the  trust  moneys  according  to  the  last  section,  he  must 
pay  simple  interest  thereon  if  such  omission  is  negligent 
merely  and  compound  interest  if  it  is  willful. 

TRUST     COMPANY     LAW. 

Sec.  4688.  Investment  of  Trust  Funds. — Any  sum  of 
money  not  less  than  one  hundred  dollars,  which  will  be  col- 
lected or  received  by  any  such  corporation  in  its  trust 
capacity,  and  which  money  shall  not  be  required  for  the  pur- 
pose of  such  trust,  or  is  not  to  be  accounted  for  within  one 
year  from  the  date  of  such  collection,  receipt  or  deposit,  shall 
be  invested  by  such  corporation  as  soon  as  practicable,  and  in 
such  securities  as  are  mentioned  in  Section  4678,  and  the  net 
interest  and  profits  of  such  investment,  less  the  reasonable 
charges  and  disbursement  of  said  company  in  the  premises, 
shall  be  accounted  for  and  paid  over  as  a  part  of  such  trust; 
and  the  net  accumulation  of  such  interest  and  profits  thereon 
shall  likewise  be  invested  and  reinvested  as  a  part  of  such 
principal ;  and  such  investments  shall  be  received  and  allowed 
in  the  settlement  of  such  trust. 

Section  4678,  above  referred  to,  is  as  follows: 
Sec.  4678.     Capital  Stock. — The   amount  of  capital  stock 
of  any  such  corporation  hereafter  organized  shall  not  be  less 
than  one  hundred  thousand  dollars,  and  the  same   shall  be 

200 


NORTH   DAKOTA.  201 

divided  into  shares  of  one  hundred  dollars  each.  No  such 
corporation  hereafter  organized  shall  be  authorized  to  transact 
any  business,  or  exercise  any  powers  as  such,  until  the  afore- 
said minimum  amount  of  capital  stock  shall  have  been  sub- 
scribed for,  and  not  less  than  fifty  thousand  dollars  thereof 
shall  have  been  actually  paid  in,  invested  and  deposited 
as  hereinafter  provided.  Said  fifty  thousand  dollars  shall 
be  invested  in  bonds  of  the  United  States,  or  of  the  state 
of  North  Dakota,  or  in  the  bonds  of  other  states,  which  shall 
have  the  approval  of  the  state  auditor,  and  state  examiner,  or 
in  the  bonds  or  obligations  of  townships,  school  districts, 
cities,  villages,  and  counties  within  the  state  of  North  Dakota, 
which  bonds  or  obligations  have  not  been  issued  as  a  bonus 
for,  or  purchase  of,  or  subscription  to  any  railroad  or  other 
private  enterprise,  and  whose  total  bonded  indebtedness  does 
not  exceed  five  per  centum  of  the  then  assessed  valuation 
thereof;  or  in  bonds  or  promissory  notes,  secured  by  first 
mortgages  or  deeds  of  trust,  upon  unincumbered  real  estate, 
situated  within  the  state  of  North  Dakota,  worth  three  times 
the  amount  of  the  obligation  so  secured,  and  the  deposit  of 
such  corporation  shall  not  be  permitted,  at  any  time,  to  be 
less  than  fifty  thousand  dollars  in  amount,  and  not  less  than 
one-sixth  of  its  capital  stock. 

Sec.  4689  provides  that  a  trust  company  shall  not  loan 
its  funds,  moneys,  capital,  trust  funds  or  other  property  to 
any  director,  officer,  agent  or  employee. 

Mingling  Trust  Funds. 

When  a  trustee  mingles  trust  funds  with  his  own  the  whole  fund 
is  treated  as  a  trust,  and  when  he  pays  out  a  portion  of  the  fund,  it 
will  be  presumed  that  he  made  the  payments  from  the  portion  of 
the  fund  which  belonged  to  him.  Widman  v.  Kellogg,  22  N.  D.  396. 

Guardian. 

The  statutes  provide  that  if  the  estate  of  the  ward  is  sold  for 
the  purpose  of  investment,  "the  guardian  must  make  the  investment 
according  to  his  best  judgment  or  in  pursuance  of  any  order  that  may 
be  made  by  the  county  court."  Eevised  Codes,  Sec.  6564. 

The  legal  authority  both  for  sales  and  investments  by  guardians 
emanates  from  the  County  Court.  Shepard  v.  Hanson,  9  N.  D.  249. 


OHIO. 

TRUST    COMPANIES. 

General    Code,    1910. 
(With   Amendments   to    1914.) 

Sec.  9781.  All  moneys  or  properties  received  on  deposit 
or  received  in  trust  by  such  corporation,  unless  by  the  terms 
of  the  trust  some  other  mode  of  investment  is  prescribed,  to- 
gether with  its  capital  and  surplus,  excepting  such  as  is  re- 
quired to  be  kept  as  a  reserve,  shall  be  invested  in  or  loaned  on 
only  the  following: 

(a)  The  securities  mentioned  in  paragraphs  (b),  (c),  (d), 
(e)  and  (f)  of  Section  ninety-seven  hundred  and  fifty-eight,  of 
this  Act  relating  to  commercial  banks,  subject  to  the  limita- 
tions  and  restrictions  contained  in  said  paragraphs,  except 
that  trust  companies  shall  not  loan  more  than  sixty  per  cent 
of  the  amount  of  their  paid-in  capital,  surplus  and  deposits  on 
notes  secured  by  mortgage  on  real  estate; 

(b)  Stocks,    which    have   paid    dividends    for   five    con- 
secutive years  next  prior  to  the  investment,  and  bonds  of  cor- 
porations when  the   same  are  authorized  by  the  affirmative 
vote  of  the  majority  of  the  board  of  directors  or  of  the  ex- 
ecutive committee  of  such  trust  company;  but  the  superin- 
tendent of  banks  may  order  that  any  such  securities  which 
he  may  deem  undesirable  shall  be  sold  within  six  months ; 

(c)  Promissory   notes   of   individuals,   firms   or    corpora- 
tions, when  secured  by  a  sufficient  pledge  of  collateral,  ap- 
proved by  the  directors,  subject  to  the  provisions  of  Section^ 
ninety-seven  hundred  and  fifty-four  and  ninety-seven  hundred 
and  fifty-five,  of  this  Act. 

Sec.  9782.     All  moneys  or  properties  received  in  trust  by 
such  company,  unless  by  the  terms  of  the  trust  some  other 

202 


OHIO.  208 

mode  of  investment  is  prescribed,  together  with  the  capital 
and  surplus  of  such  corporation,  may  also  be  invested  in 
ground  rents,  when  authorized  by  a  vote  of  the  board  of 
directors. 

Sec.  9783.  Not  more  than  twenty  per  cent  of  the  capital 
and  surplus  of  any  such  corporation  shall  be  invested  in  any 
one  security  or  loan  unless  it  be  in  the  bonds  or  other  in- 
terest-bearing obligations  enumerated  in  paragraphs  (b),  (c) 
and  (d)  of  Section  ninety-seven  hundred  and  fifty-eight,  or 
in  providing  a  building  and  vaults. 

Sec.  9784.  No  investment  in  notes  secured  by  mortgage 
on  real  estate  shall  be  made  by  such  corporation  except  upon 
the  approval  of  the  board  of  directors. 

Sec.  9785.  No  trust  company  shall  lend  any  part  of  its 
capital  and  surplus  unless  such  loan  be  secured  by  bonds  or 
stocks  as  collateral  in  which  it  is  allowed  to  invest  its  capital, 
or  by  mortgage  on  real  estate,  where  the  amount  loaned  in- 
clusive of  prior  encumbrances  thereon  does  not  exceed  sixty 
per  cent  of  the  value  of  the  real  estate,  including  improve- 
ments, which  shall  be  kept  adequately  insured;  nor  shall  such 
corporation  lend  to  any  one  person,  firm,  association  or 
corporation  more  than  twenty  per  cent  of  its  paid-in  capital 
and  surplus. 

Sec.  9786.  This  section  provides  that  trust  funds  shall  be 
kept  separate  from  other  funds. 

Sec.  9788.  In  the  management  of  money  and  property 
held  by  it  as  trustee,  under  the  powers  conferred  in  the  fore- 
going sections,  such  trust  company  may  invest  the  same  in  a 
general  trust  fund  of  the  corporation.  But  the  authority 
making  the  appointment,  upon  the  conferring  of  it,  may  direct 
whether  such  money  and  property  shall  be  held  separately  or 
invested  in  a  general  trust  fund  of  the  corporation;  except 
that  such  corporation  always  shall  follow  and  be  governed  by 
all  directions  contained  in  any  instrument  under  which  it  acts. 

Sec.  9754.  ,A  bank  doing  business  as  a  commercial  bank 
shall. not  lend,  including  overdrafts,  to  any  one  person,  firm 
or  corporation,  more  than  twenty  per  cent  of  its  paid-in  capital 
and  surplus,  unless  such  loan  be  secured  by  first  mortgage 


204  STATE   LAWS   AND   DECISIONS. 

upon  improved  farm  property  in  a  sum  not  to  exceed  sixty  per 
cent  of  its  value.  The  total  liabilities,  including  overdrafts, 
of  a  person,  company,  corporation,  or  firm  to  any  bank, 
either  as  principal  debtor  or  as  security  or  endorser  for  others, 
for  money  borrowed,  at  no  time  shall  exceed  twenty  per  cent 
of  its  paid-in  capital  stock  and  surplus.  But  the  discount  of 
bills  of  exchange  drawn  against  actual  existing  values  and 
the  discount  of  commercial  or  business  paper  actually  owned 
by  the  person,  company,  corporation  or  firm  negotiating  it, 
shall  not  be  considered  as  money  borrowed. 

Sec.  9755.  The  deposits  of  funds  in  a  bank  or  trust 
company,  not  duly  designated  as  a  depository  by  the  board 
of  directors  as  hereinafter  provided,  shall  be  held  to  be  a  loan 
within  the  meaning  of  the  preceding  section. 

Sec.  9758.  Subject  to  the  provisions  of  the  preceding  sec- 
tion, commercial  banks  may  invest  their  capital,  surplus  and 
deposits  in,  or  lend  them  upon: 

(a)  Personal  or  collateral  securities; 

(b)  Bonds  or  other  interest-bearing    obligations    of    the 
United   States,  or  those  for  which  the  faith  of  the   United 
States  is  pledged  to  provide  payment  of  the  interest  and  prin- 
cipal, including  bonds  of  the  District  of  Columbia ;  also  bonds 
or  other  interest-bearing  obligations  of  any  foreign  govern- 
ment; 

(c)  Bonds  or  interest-bearing  obligations  of  this  or  any 
other  state  of  the  United  States ; 

(d)  The  legally  issued  bonds  or  interest-bearing  obliga- 
tions of  any  city,  village,  county,  township,  school  district,  or 
other   district  or  political  subdivision  of  this  or   any  other 
state  or  territory  of  the  United  States  and  of  Canada; 

(e)  Mortgage    bonds    or    collateral   trust   bonds    of   any 
regularly  incorporated  company,  which  has  paid,  for  at  least 
four  years,  dividends  at  the  rate  of  at  least  four  per  cent 
on  their  capital  stock.    Such  loan  shall  not  exceed  eighty  per 
cent  of  the  market  or  actual  value  of  such  bonds,  the  purchase 
of  which  has  been  first  authorized  by  the  directors.    All  such 
securities  having  a  fixed  maturity  shall  be  charged  and  entered 


OHIO.  205 

upon  the  books  of  the  bank  at  their  cost  to  the  bank,  or  at  par, 
when  a  premium  is  paid,  and  the  superintendent  of  banks  shall 
have  the  power  to  require  any  security  to  be  charged  down  to 
such  sum  as  in  his  judgment  represents  its  value.  The  superin- 
tendent of  banks  may  order  that  any  such  securities  which  he 
deems  undesirable  be  sold  within  six  months. 

(f)  Notes  secured  by  mortgage  on  real  estate,  where  the 
amount  loaned  thereon  inclusive  of  -prior  encumbrances  does 
not  exceed  forty  per  cent  of  the  value  of  the  real  estate  if 
unimproved,  and  if  improved  sixty  per  cent  of  its  value,  in- 
cluding improvements,  which  shall  be  kept  adequately  in- 
sured. Not  more  than  fifty  per  cent  of  the  amount  of  the  paid- 
in  capital,  surplus  and  deposits  of  such  bank  at  any  time  shall 
be  invested  in  such  real  estate  securities. 

Guardians. — Under  the  duties  of  guardians  and  trustees, 
Section  10933,  subdivision  7,  of  the  Ohio  code,  provides  that 
it  is  the  duty  of  a  guardian,  within  a  reasonable  time  after 
he  receives  it,  to  loan  or  invest  the  money  of  his  ward,  in 
notes  or  bonds,  secured  by  first  mortgage  on  real  estate  of  at 
least  double  the  value  of  the  money  loaned  or  invested.  The 
buildings  thereon,  if  any,  must  be  well  insured  against  loss 
by  fire  and  so  kept  by  the  mortgagor  for  the  benefit  of  the 
mortgagee,  until  the  debt  is  paid.  On  failure  so  to  do,  the 
mortgagee  shall  insure  them  and  the  expense  to  him  be  re- 
paid by  the  mortgagor  and  be  a  lien  on  the  property  concur- 
rent with  the  mortgage.  Or  he  may  invest  such  money  in 
bonds  of  the  United  States,  or  of  a  state  on  which  default 
has  never  been  made  in  the  payment  of  interest,  or  bonds  of  a 
county  or  city  in  this  state,  issued  in  conformity  to  law;  or 
with  the  approval  of  the  probate  court,  in  productive  real 
estate  within  this  state,  the  title  to  which  must  be  taken  in 
the  name  of  the  guardian  as  such.  He  also  shall  manage  such 
investments,  and  when  deemed  proper,  change  them  into  other 
investments  of  the  above  classes.  No  real  estate  so  purchased 
shall  be  sold  by  the  guardian,  except  with  the  approval  of  the 
probate  court.  If  the  guardian  fails  to  loan  or  invest  money 
of  his  ward  within  such  reasonable  time,  he  must  account  on 


206  STATE   LAWS   AND   DECISIONS. 

settlement  for  such  money  and  interest    thereon,   calculated 
with  annual  rests. 

Note. — This  section  refers  to  guardians  only.  In  Ohio  trust 
companies  have  no  power  to  act  as  guardians. 

TRUSTEES    GENERALLY. 

Page    and    Adams  Code.     Vol.    5. 

Sec.  11214.  When  they  have  funds  belonging  to  the  trust 
which  are  to  be  invested,  executors,  administrators,  guar- 
dians, and  trustees,  may  invest  them  in  certificates  of  the  in- 
debtedness of  this  state,  of  the  United  States,  or  in  such  other 
securities  as  the  court  having  control  of  the  administration  of 
the  trust  approves.  When  money  coming  into  the  hands  of  an 
executor,  administrator,  trustee,  agent,  assignee,  attorney  or 
officer  is  stopped  therein  by  reason  of  litigation  or  other  law- 
ful cause,  and  if  it  will  probably  be  so  detained  for  more  than 
six  months,  he  may  invest  it  during  such  detention  in  the 
manner  that  trust  funds  are  now  authorized  by  law  to  be  in- 
vested, or  as  the  probate  or  other  court  having  jurisdiction  of 
the  pending  litigation,  or  person  aforesaid,  directs. 

Duty  to  Call  in  Estate. 

It  is  the  duty  of  an  executor  to  convert  the  assets  of  an  estate 
into  money.  He  must  collect  the  funds  for  distribution  or  invest- 
ment as  the  case  may  be.  Weyer  v.  Watt,  48  O.  St.  545. 

It  seems  that  an  executor  should  have  one  year  within  which  to 
collect  assets.  Gray  v.  Case  School,  62  O.  St.  1. 

Duty  to  Invest. 

Failure  on  the  part  of  a  trustee  to  invest  the  funds  within  a  reason- 
able time  renders  him  liable  for  interest.  In  re  Spencer's  Appeal,  2  O. 
Dec.  Reprint  510. 

A  trustee  is  required  to  invest  the  funds  under  his  control.  In  re 
Strickland,  1  O.  Dec.  703;  Armstrong  v.  Miller,  6  Ohio  119. 

Purchase  of  Real  Estate. 

With  the  consent  of  the  probate  court  a  trustee  may  purchase  real 
estate  for  the  benefit  of  the  cestui  que  trust.  Fourth  National  Bank  v. 
Hopple,  6  O.  Dec.  482. 


OHIO.  207 

Duty  of  Co-trustees. 

When  co-trustees  leave  the  duty  of  investing  the  funds  to  one  of 
their  number,  and  he  applies  the  money  to  his  own  use,  all  are  liable 
for  the  loss.  State  v.  Guilford,  15  Ohio  593. 

Mingling  Funds. 

A  trustee  who  deposits  trust  funds  to  his  personal  account  is  liable 
for  any  loss.  Shaw  v.  Bauman,  34  O.  St.  25;  Lotze  v.  Hoerner,  11  O. 
Dec.  Eeprint  131. 

It  is  important  that  the  trustee  keep  the  investments  separate 
and  in  the  name  of  the  trust.  Brown  v.  Williams,  9  O.  C.  C.  N.  S.  307. 

But  if  he  selects  a  reputable  bank  and  deposits  the  funds  in  his 
name  as  trustee,  he  is  not  liable.  Odd  Fellows'  Ben.  Assn.  v.  Ferson, 
2  0.  C.  D.  48. 

Change  of  Real  Estate  Into  Money. 

Unless  he  has  express  authority  by  the  trust  instrument  or  by  order 
of  court,  a  trustee  should  not  change  realty  into  personalty.  In  re 
Spencer's  Appeal,  2  O.  Dee.  Eeprint  510. 

Care  Required  of  Trustee. 

A  trustee  is  bound  to  exercise  ordinary  prudence  and  good  faith 
in  investing  the  funds.  In  re  Spencer's  Appeal,  2  O.  Dec.  Eeprint  510. 

Where  trustees  exercise  the  diligence  of  ordinary  men  in  making 
an  investment,  and  have  relied  upon  the  advice  of  an  attorney,  they 
are  not  liable  for  a  mistake  in  law.  Miller  v.  Proctor,  20  O.  St.  442. 

Continuing   Business   of   Testator. 

In  the  absence  of  specific  authority  a  trustee  has  no  right  to 
continue  a  business  in  which  the  creator  of  the  trust  has  been  en- 
gaged. When  he  is  authorized  to  continue  a  business  a  trustee  may 
be  held  liable  personally,  if  he  permits  debts  to  be  contracted  beyond 
the  amount  embarked  in  the  business.  As  a  general  rule  the  estate 
is  not  liable  beyond  the  amount  embarked  in  the  business.  Lucht  v. 
Behrens,  28  O.  St.  231. 

Where  trustees  are  expressly  authorized  by  will  to  continue  a  busi- 
ness, they  may  carry  on  a  partnership  and  settle  its  affairs  at  the 
appointed  time  for  dissolution.  Jones  v.  Proctor,  14  Ohio  Cir.  Dec.  80. 

Mercantile   Business. 

Trustees  have  no  right  to  loan  trust  funds  to  a  manufacturing 
company  on  .mere  personal  security,  or  to  carry  on  a  mercantile  busi- 
ness. Adams  v.  Nelson,  1  O.  Dec.  216. 


208  STATE   LAWS   AND   DECISIONS. 

Mortgage. 

A  mortgage  on  adequate  real  estate  is  proper.  In  re  Spencer's 
Appeal,  2  O.  Dec.  Eeprint  510. 

The  Guardian's  Act  of  1857  provided  that  the  money  of  the  ward 
should  be  lent  •within  a  reasonable  time,  and  secured  by  a  mortgage 
upon  real  estate,  of  double  the  value  of  the  money  lent. 

' '  Ordinary  prudence ' '  would  require  a  trustee  to  loan  no  more 
than  two-thirds  of  the  fair  appraisal  price.  In  re  Spencer's  Appeal, 
2  O.  Dec.  Eeprint  510. 

Second  Mortgage. 

A  trustee  should  not  accept  a  second  mortgage.  In  re  Spencer's 
Appeal,  2  0.  Dec.  Eeprint  510. 

Bank  Stock. 

By  the  statutes,  a  trustee  is  limited  in  his  investments.  But 
where  the  trust  instrument  expressly  provides,  the  scope  of  the  statute 
may  be  extended.  Where  a  will  gave  a  trustee  power  to  sell  and 
"reinvest"  the  proceeds  "in  sueh  manner  as  she  or  they  may  think 
best,"  the  statute  is  extended  and  a  trustee,  exercising  due  care,  may 
invest  in  bank  stock.  Willis  v.  Braucher,  79  O.  St.  290. 

Personal  Security. 

The  law  does  not  permit  trustees  to  invest  on  mere  personal  se- 
curity. But  where  trustees  are  given  full  power  to  manage  a  trust 
fund  "as  they  think  best  for  said  poor,"  they  may  invest  in  real 
estate  security  or  notes  or  bonds  without  security.  Scott  v.  Trustees 
of  Marion  Township,  39  O.  St.  153. 

Must  Follow  Directions  in  Trust  Instrument. 

A  trustee  may  not  substitute  his  judgment  for  that  of  the  creator 
of  a  trust.  Where  he  is  required  to  buy  in  at  a  foreclosure  sale  to 
protect  the  estate,  he  must  sell  as  soon  as  practicable  and  reinvest  as 
directed  by  the  creator  of  the  trust.  Willis  v.  Holcomb,  83  O.  St.  254. 

Trustee  to  Wind  up  a  Bank. 

A  trustee  appointed  to  wind  up  the  affairs  of  a  savings  bank  has 
no  power  to  loan  funds  which  may  come  into  his  hands.  He  may 
make  a  special  deposit  in  bank  as  trustee.  Smith  v.  Fuller,  86  O.  St.  57. 

Use  by  Trustee. 

The  use  by  a  trustee  of  the  funds  does  not  constitute  embezzle- 
ment unless  there  is  a  fraudulent  intent.  State  v.  Meyer,  10  0.  Dec. 
Eeprint  746. 


OKLAHOMA. 

TRUST    COMPANIES. 

Statutes     of    1903. 
(With   Amendments   to    1914.) 

Sec.  1125.  The  directors  of  corporations  created  under 
this  Article  shall  have  power  of  investing  the  moneys  placed 
in  their  charge  in  loans  secured  by  real  estate  or  other  suf- 
ficient collateral  security,  in  public  bonds  of  the  United  States 
or  of  this  territory,  or  of  any  state,  or  in  the  bonds  or  stocks 
of  any  county  or  school  district,  or  any  incorporated  city, 
town  or  village  of  any  state  or  in  this  territory  or  in  the 
Indian  Territory.  Such  corporations  shall  own  only  such  real 
estate  as  may  be  required  for  the  transaction  of  their  busi- 
ness, and  such  as  they  may  acquire  in  the  enforcement  and 
collection  of  debts  or  liabilities  due  to  them. 

TRUSTEES. 

Statutes    of    1909. 

Sec.  5396.  Investment  of  Funds. — Pending  the  settlement 
•of  any  estate  on  the  petition  of  any  party  interested  therein, 
the  county  court  may  order  any  money  in  the  hands  of  the 
executor  or  administrators  to  be  invested  for  the  benefit  of 
the  estate,  in  securities  of  the  United  States.  Such  order  can 
only  be  made  after  publication  of  notice  of  the  petition  in 
some  newspaper  to  be  designated  by  the  judge. 

Liability   for   Loss. 

A  trustee  is  responsible  for  ordinary  care  and  diligence  in  taking 
possession  of  and  managing  the  .trust  property.  Wyman  v.  Herard,  9 
•Okla.  35. 

Mingling  Trust  Funds. 

If  a  trustee  deposits  trust  funds  with  his  own,  the  whole  is  con- 
sidered trust  property.  Fidelity  &  Deposit  Co.  v.  Eankin,  33  Okla.  7. 

209 


210  STATE   LAWS   AND   DECISIONS. 

• 

Guardian. 

The  statutes  provide  that  the  County  Court  may  authorize  and 
require  a  guardian  to  invest  the  proceeds  of  sales  and  any  other  of  his 
ward's  money  in  real  estate  or  in  any  other  manner  most  to  the  interest 
of  all  concerned.  When  property  is  sold  for  investment,  the  guardian 
must  invest  according  to  his  best  judgment  or  in  pursuance  of  any 
order  that  may  be  made  by  the  County  Court.  Eevised  Laws,  Sec- 
tions 6556,  6569. 

Investment  of  School  Funds. 

What  are  considered  legal  investments  in  Oklahoma  is  indicated 
in  Section  7942,  Comp.  Laws  1909,  which  provides  that  until  the  school 
funds  may  be  permanently  invested  as  provided  by  law,  the  commis- 
sioners of  the  land  office  are  empowered  to  deposit  them  in  banks  or 
trust  companies,  but  shall  in  every  case  select  as  security  therefor: 
Bonds  of  the  State  of  Oklahoma,  bonds  of  the  counties,  school  dis- 
tricts, cities  and  towns  of  this  state,  county  and  municipal  bonds  of 
other  states,  bonds  of  the  United  States,  first  mortgages  on  real  estate 
and  securities  issued  by  municipalities  in  payment  of  paving,  sewer, 
waterworks,  electric  lights  or  other  public  indebtedness,  for  which  a 
special  tax  may  be  levied.  Columbia  Bank  &  Trust  Co.  v.  U.  S.  Fidelity 
&  Guaranty  Co.,  126  Pac.  Eep.  556. 


OREGON. 

TRUST    COMPANIES. 

General   Laws    of    1911. 
(With   Amendments   to   1914.) 

Investment  of  Trust  Funds. — By  Chapter  354  of  the  Laws 
of  1913,  trust  companies  are  authorized  to  invest  trust  funds 
"in  bonds  of  the  United  States  of  America,  or  bonds  of  which 
the  faith  of  the  United  States  is  pledged  for  the  payment  of 
the  principal  and  interest,  or  in  bonds  or  warrants,  issued  in 
pursuance  of  law,  of  any  state  of  the  United  States  of  Amer- 
ica, or  any  county,  school  district  or  municipal  corporation 
therein,  which  has  not  defaulted  in  the  payment  of  either  prin- 
cipal or  interest  thereof,  within  five  years  previous  to  mak- 
ing such  investment,  or  in  notes  or  bonds  secured  by  unin- 
cumbered  real  estate,  the  actual  value  of  which  shall  not  be 
less  than  twice  the  amount  loaned  thereon,  or  in  bonds  or 
notes  secured  by  a  pledge  of  collateral  or  personal  property,* 
the  actual  cash  market  value  of  which  shall  be  at  least  twenty 
per  cent  more  than  the  amount  loaned  thereon,  or  in  such 
other  bonds  or  securities  as  the  Superintendent  of  Banks  shall 
approve,  and  not  otherwise." 

When    Chargeable   with   Interest. 

A  trustee  is  not  chargeable  with  interest  unless  he  has  used  the 
funds  for  his  own  benefit,  or  has  invested  them  to  produce  interest, 
or  has  permitted  them  to  lie  idle  when  they  might  have  been  in- 
vested. Martin  v.  Martin,  43  Or.  119. 

Where  a  guardian  makes  a  separate  deposit  of  funds  he  should  not 
be  charged  with  interest.  Independent  Foresters  v.  Keliher,  36  Or.  501. 

Mingling    Funds. 

Where  a  guardian  mingled  trust  funds  with  her  own  and  put  part 
of  the  fund  out  at  interest,  it  seems  that  she  was  chargeable  with  in- 

211 


212  STATE   LAWS   AND   DECISIONS. 

terest    only    upon    the   portion    of   trust    fund   which   was    lent.     Inde- 
pendent Foresters  v.  Keliher,  36   Or.  501. 

Mortgages. 

A  trustee,  in  determining  the  value  of  land  upon  which  he  takes 
a  mortgage,  is  required  to  exercise  the  judgment  of  ordinary  men.  If 
his  action  is  questioned  the  burden  is  upon  him  to  prove  the  adequacy 
of  the  security.  If  he  fails  to  prove  that  he  exercised  due  care  in 
selecting  the  security,  he  is  liable  for  any  loss.  Eoach's  Estate,  50 
Or.  179. 

Personal  Loan.  , 

A  trustee  is  liable  for  the  loss  of  funds  lent  without  security. 
Eoach's  Estate,  50  Or.  179. 

Corporate   Stock. 

It  seems  that  Oregon  follows  the  New  Jersey  rule  and  does  not 
sanction  an  investment  in  corporate  stock.  Eoach's  Estate,  50  Or.  179. 

Guardian. 

The  statutes  provide  that  the  court  may  authorize  guardians  to 
invest  the  proceeds  of  sales  and  any  other  of  their  wards'  money  in 
real  estate  or  in  any  other  manner  most  to  the  interest  of  all  con- 
cerned. When  property  is  sold  for  investment,  the  guardian  must  in- 
vest according  to  his  best  judgment  or  in  pursuance  of  any  order  that 
may  be  made  by  the  court.  Lord's  Oregon  Laws,  Vol.  I,  Sees.  1330-1349. 

Good  Faith  and  Due  Diligence. 

There  is  no  statute  regulating  investments  of  trust  funds,  except 
the  sections  relating  to  guardians.  Trustees  are  bound,  therefore,  to 
employ  such  prudence  and  diligence  as  men  of  discretion  employ  in 
the  management  of  their  own  affairs.  Eoach's  Estate,  50  Or.  197. 

The  Trust  Company  Law  of  1913  provides  for  investments  by  such 
corporations  when  they  act  as  trustees.  This  section,  above  quoted, 
is  a  guide  for  trustees  generally. 


PENNSYLVANIA. 

INVESTMENTS    BY    TRUSTEES. 

Purdon  's    Statutes. 

Sec.  115.  No  act  of  the  general  assembly  shall  authorize 
the  investment  of  trust  funds  by  executors,  administrators, 
guardians,  or  other  trustees,  in  the  bonds  or  stocks  of  any 
private  corporation;  and  such  acts  now  existing  are  avoided, 
saving  investments  heretofore  made.  (Constitution,  Art.  Ill, 
Sec.  22.) 

Sec.  116.  "When  an  executor,  administrator,  guardian  or 
trustee  shall  have  in  his  hands  any  moneys,  the  principal  or 
capital  whereof  is  to  remain  for  a  time  in  his  possession,  under 
his  control,  and  the  interests,  profits  or  income  thereof  are  to 
b'e  paid  away,  or  to  accumulate,  or  when  the  income  of.  a  real 
estate  shall  be  more  than  sufficient  for  the  purpose  of  the 
trust,  such  executor,  administrator,  guardian  or  trustee  may 
present  a  petition  to  the  Orphans'  Court  of  the  proper  county, 
stating  the  circumstances  of  the  case,  and  the  amount  or  sum 
of  money  which  he  is  desirous  of  investing;  whereupon  it 
shall  be  lawful  for  the  court,  upon  due  proof,  to  make  an 
order  directing  the  investment  of  such  moneys  in  the  stock 
or  public  debt  of  the  United  States,  or  in  the  public  debt  of 
this  commonwealth  or  in  the  public  debt  of  the  city  of  Phila- 
delphia, or  on  real  securities,  at  such  prices,  or  on  such  rates 
of  interest  and  terms  of  payment  respectively,  as  the  court 
shall  think  fit;  and  in  case  the  said  moneys  shall  be  invested 
conformably  to  such  directions,  the  said  executor,  adminis- 
trator, guardian  or  trustee  shall  be  exempted  from  all  lia- 
bility for  loss  on  the  same,  in  like  manner  as  if  such  invest- 
ments had  been  made  in  pursuance  of  directions  in  the  will  or 
other  instrument  creating  the  trust;  provided,  that  nothing 
herein  contained  shall  authorize  the  court  to  make  an  order 

213 


214  STATE   LAWS   AND   DECISIONS. 

contrary  to  the  direction  contained  in  any  will  or  other  in- 
strument, in  regard  to  the  investment  of  such  moneys. 

Sec.  117.  Section  14  of  the  act  entitled  "An  act  relating  to 
Orphans'  Court/'  approved  the  twentieth  day  of  March,  Anno 
Domini,  one  thousand,  eight  hundred  thirty-two,  be  and  the 
same  is  hereby  extended  so  as  to  include  all  bonds  or  certif- 
icates of  debt  now  or  hereafter  to  be  created  and  issued  ac- 
cording to  law  by  any  of  the  counties,  cities,  school  districts 
or  municipal  corporations  of  this  commonwealth;  which  said 
bonds  or  certificates  are  hereby  declared  to  be  legal  invest- 
ments of  moneys,  by  executors,  administrators,  guardians  or 
trustees. 

Sec.  118.  It  shall  and  may  be  lawful  for  any  trustee,  com- 
mittee, guardian  or  other  person  acting  in  a  fiduciary  capacity, 
to  invest  trust  moneys  in  ground  rents,  or  other  real  estate,  by 
leave  of  the  proper  court,  under  proceedings  as  provided  in 
the  act  to  which  this  is  a  supplement:  provided,  that  it  shall 
be  the  opinion  of  the  court,  that  such  investment  will  be  for 
the  advantage  of  the  estate,  and  no  change  be  made  in  the 
course  of  succession  by  such  change  of  investment,  as  regards 
the  heirs  of  next-of-kin  of  the  cestui  que  trust. 

Trust  Companies. — The  rules  applicable  to  individual  trus- 
tees apply  also  to  trust  companies.  Such  companies  are  also 
required  to  keep  all  trust  funds  and  investments  separate  and 
apart  from  the  assets  of  the  company,  and  all  investments 
made  by  the  said  companies  as  fiduciaries  shall  be  so  desig- 
nated as  that  the  trust  to  which  such  investment  shall  belong 
shall  be  clearly  known. 

Note. — It  follows,  therefore,  that  unless  the  trust  instru- 
ment provides  otherwise,  the  courts  are  authorized  to  direct 
investments  in  the  following  securities  only: 

1.  Stocks  or  public  debt  of  the  United  States. 

2.  Public  debt  of  the  Commonwealth  of  Pennsylvania. 

3.  Public  debt  of  the  City  of  Philadelphia. 

4.  Real  securities,  e.  g.,  mortgages. 

5.  Real  estate,  including  ground  rents,  and  then  only  by 
leave  of  court. 


PENNSYLVANIA.  215 

6.     All  bonds  or  certificates  of  debt  issued  by  any  county, 
city,  school  district  or  municipal  corporation  of  Pennsylvania. 
It  further  follows: 

1.  One  acting  in  a  fiduciary  capacity  who  before  making 
an  investment  in  any  of  the  above-authorized  securities  ob- 
tains leave  of  court  as  provided  in  the  acts  is  relieved  of  all 
responsibility  for  any  subsequent  default  or  depreciation.     It 
is  to  be  noted  in  this  connection,  however,  that  the  courts  are 
loath  to  entertain  petitions  asking  for  leave  to  invest  in  au- 
thorized securities.     They  very  properly  maintain  that  in  the 
case  of  ordinary  investments  not  involving  any  unusual  ex- 
ercise of  judgment  a  trustee  should  not  strive  to  escape  a 
responsibility  incident  to  the  trust.     Only  unusual  conditions 
would  justify  an  application  to  the  courts  with  its  necessary 
delay  and  expense. 

2.  One  acting  in  a  fiduciary  capacity  who  without  leave 
of  court  invests  in  any  of  the  above  authorized  securities  is 
not  thereby  relieved  of  the  obligation  to   exercise  due   care 
and  reasonable  prudence  in  the  selection  of  the  investment. 
The  absence  of  such  care  or  prudence  would  create  a  liability 
for  any  subsequent  default  or  depreciation. 

3.  One  acting  in  a  fiduciary  capacity  who  invests  in  any 
securities  other  than  those  above  authorized  and  in  the  ab- 
sence of  any  authority  in  the  instrument  creating  the  trust 
is  by  virtue  of  that  fact  alone  and  irrespective  of  the  exer- 
cise of  due  care  or  prudence  in  other  respects  liable  for  any 
subsequent  default  or  depreciation. 

Duty  to  Invest. 

It  is  the  duty  of  a  trustee  to  make  the  funds  productive.  If  he 
is  unable  to  find  legal  securities  in  which  to  invest  he  may  apply  to 
the  court  for  instructions.  Hower's  Appeal,  22  W.  N.  C.  536;  Fray's 
Appeal,  34  Pa.  100. 

Even  if  the  fund  is  small,  a  trustee  is  liable  for  interest  if  he 
fails  to  ask  the  direction  of  court.  McCauseland's  Appeal,  38  Pa.  466. 

But  he  may  retain  a  moderate  sum  for  the  uses  of  the  trust. 
Lukens'  Appeal,  47  Pa.  356. 

Time  Allowed  for  Investing. 

A  reasonable  time  should  be  allowed  for  making  investments.  The 
time  depends  on  circumstances,  but  where  a  trustee  has  used  ordinary 


216  STATE  LAWS  AND  DECISIONS. 

care,  he  will  not  be  chargeable  with  interest  for  failure  to  invest 
within  three  months.  Lukens'  Appeal,  47  Pa.  356. 

In  view  of  the  facility  with  which  trust  funds  may  now  be  de- 
posited at  interest  until  permanent  investments  can  be  made,  it  is 
doubtful  whether  any  considerable  time  should  be  allowed.  Noble's 
Estate,  178  Pa.  460. 

An  allowance  of  two  months  is  not  undue.  Witmer's  Appeal,  87 
Pa.  120. 

In  the  earlier  decisions,  six  months  were  ordinarily  allowed  for 
investment.  Worrell's  Appeal,  23  Pa.  44. 

Deposits  in  Bank. 

A  trustee,  while  seeking  investment,  should  deposit  trust  funds  in 
bank  in  his  name  as  trustee,  and  if  possible  at  interest.  Where  such 
a  deposit  draws  three  per  cent  interest,  provided  the  trustee  gives  the 
bank  two  weeks  notice  of  withdrawal,  it  is  a  reasonable  provision  and 
not  inconsistent  with  a  deposit.  Consequently  the  trustee  is  not  liable 
for  loss  if  the  bank  fails.  Law's  Estate,  144  Pa.  499. 

But  a  certificate  of  deposit  in  a  private  bank  payable  twelve 
months  after  date  is  a  personal  loan  and  not  a  proper  deposit  or 
investment.  Baer's  Appeal,  127  Pa.  360. 

A  certificate  of  deposit  in  a  savings  bank,  although  it  is  payable 
in  three  months  and  draws  six  per  cent  interest  is  not  a  legal  invest- 
ment. Frankenfield's  Appeal,  11  W.  L.  N.  373;  quoted,  127  Pa.  369. 

But  a  trustee  may  keep  funds  on  deposit  for  a  reasonable  time 
pending  investment.  The  circumstances  of  each  case  determine  what 
constitutes  a  reasonable  time.  When  it  appears  that  he  could  have 
invested  in  authorized  securities,  a  deposit  for  eight  months  is  an  un- 
reasonable time,  and  he  is  liable  for  loss  due  to  failure  of  the  bank. 
Clark's  Estate,  56  P.  L.  J.  193. 

A  trustee  who  has  permitted  a  fund  to  remain  on  deposit  in  a 
savings  bank  for  fifteen  years,  drawing  only  three  per  cent  interest,  is 
guilty  of  supine  negligence.  A  surcharge  of  one  per  cent  per  annum 
will  not  more  than  represent  the  loss  to  the  estate.  Whitecar's  Estate, 
147  Pa.  368. 

Carrying  on  Business. 

When  a  trustee  is  specifically  authorized  to  carry  on  a  business, 
he  may  sell  on  credit  in  the  ordinary  course  of  that  business.  Cline's 
Appeal,  106  Pa.  617. 

Personal  Security. 

It  is  well  settled  in  this  state  that  a  trustee  who  invests  trust 
funds  upon  mere  personal  security  is  liable  for  any  loss.  Strong's 
Estate,  160  Pa.  13;  Dietterieh  v.  Heft,  5  Pa.  87;  Hemphill's  Appeal,  18 
Pa.  303. 


PENNSYLVANIA.  217 

A  loan  on  personal  security  may  afford  ground  for  dismissal  of 
the  trustee.  Johnson's  Appeal,  9  Pa.  416. 

Interest. 

Ordinarily  a  trustee  is  chargeable  with  the  interest  which  might 
have  been  earned  under  a  proper  investment.  It  has  not  been  usual 
to  charge  compound  interest  for  ordinary  neglect.  Graver's  Appeal, 
50  Pa.  189;  Worrell's  Appeal,  23  Pa.  44;  Eoberts'  Estate,  22  Pa.  C.  C.  4. 

But  in  Noble's  Estate,  178  Pa.  460,  where  a  guardian  mingled  hia 
ward's  money  with  his  own,  interest  was  compounded  on  the  surplus 
income.  In  a  case  of  simple  neglect,  however,  it  would  seem  that 
simple  interest  only  is  chargeable.  Pennypacker's  Appeal,  41  Pa.  494. 

Compounding  interest  by  means  of  rests  has  not  been  generally 
adopted  in  Pennsylvania.  Dietterich  v.  Heft,  5  Pa.  87. 

Continuing  Investments  Made  by  Testator. 

A  trustee  who  for  more  than  a  year  retained  investments  in 
stocks  which  came  into  his  hands  was  not  chargeable  with  neglect. 
Where  a  trustee  receives  investments  which  have  been  made  by  the 
creator  of  the  trust,  the  strict  legal  rules  do  not  apply  and  whether 
or  not  he  will  retain  the  investment  is  left  to  his  discretion,  exercised 
in  good  faith.  Coggins'  Appeal,  3  Walk.  426;  Estate  of  Williamson, 
12  Phila.  64;  Christian's  Estate,  13  Pa.  C.  C.  283. 

But  recent  cases  seem  to  indicate  that  unless  the  trust  instrument 
authorizes  the  continuance  of  investments  made  by  the  creator  of  the 
trust,  the  wisest  plan  for  the  trustee  is  to  call  in  the  estate  and  invest 
in  legal  securities.  Skeer's  Estate,  236  Pa.  404;  Bartol's  Estate,  182 
Pa.  407. 

It  seems  that  when  bonds  of  doubtful  value  come  into  the  hands  of 
trustees  as  a  part  of  the  estate,  it  is  their  duty  to  convert  them  into 
cash  and  properly  invest  the  proceeds.  They  are  not  permitted  to  ex- 
change them  for  stock.  Locher's  Estate  (No.  2),  219  Pa.  46. 

Investment  Outside  of  State. 

Trust  funds  in  Philadelphia  may  be  invested  in  mortgages  upon 
property  in  Camden.  Gouldey's  Estate,  201  Pa.  491. 

But  this  is  because  of  the  nearness  of  the  two  cities.  The  general 
rule  is  that  a  court  will  not  authorize  an  investment,  the  collection 
of  which  must  be  enforced  outside  of  the  state.  Bush's  Estate,  12 
Pa.  375;  Eoberts'  Estate,  22  Pa.  C.  C.  4. 

This  applies  also  to  bonds  of  a  railroad  located  in  another  state. 
Hoyt's  Estate,  2  Kulp.  286. 

A  trustee  who  invests  in  Western  mortgages  renders  himself  per- 
sonally liable  for  the  principal  and  interest  which  might  have  been 
secured  in  a  legal  investment.  Eoberts'  Estate,  22  Pa.  C.  C.  4. 


218  i  STATE   LAWS   AND   DECISIONS. 

Second  Mortgages. 

A  loan  on  second  or  third  mortgages  is  illegal.  Makin's  Estate, 
20  Pa.  C.  C.  587;  Gaw's  Estate,  12  Phila.  4;  Glesenkamp's  Estate, 
48  P.  L.  J.  356. 

Stocks    and   Bonds. 

Article  III,  Sec.  22,  of  the  Constitution,  which  prohibits  the  invest- 
ment of  trust  funds  in  stocks  or  bonds  of  private  corporations,  re- 
pealed the  earlier  Acts  of  1870  and  1873,  which  authorized  trustees 
to  invest  in  the  bonds  of  the  Pennsylvania  Kailroad  Company,  and  the 
Act  of  1872  which  authorized  investments  in  the  bonds  of  the  Phila- 
delphia &  Beading  Eailroad  Company.  The  only  exception  to  the  rule 
is  where  a  court  orders  such  investment  to  be  made  by  a  Committee 
of  a  lunatic  or  drunkard.  Commonwealth  v.  McConnell,  226  Pa.  244. 

The  rule  applies  to  a  bank,  railroad,  manufacturing  or  canal  com- 
pany. Morris  v.  Wallace,  3  Pa.  319;  "Worrell's  Appeal,  23  Pa.  44. 

Where  a  will  gives  a  trustee  full  power  to  take  charge  of  an  estate 
and  sell  the  real  and  personal  property,  at  the  same  time  allowing  the 
trustee  absolute  discretion  as  to  management,  an  investment  in  rail- 
road bonds  may  be  sustained.  But  it  must  clearly  appear  that  the 
will  gives  authority  for  such  an  investment.  Barker's  Estate,  159 
Pa.  518. 

An  investment  in  stock  of  the  Bank  of  the  United  States  has  been 
held  illegal.  HemphiU's  Appeal,  18  Pa.  303. 

Where  a  will  authorizes  a  trustee  to  sell  any  part  of  the  estate 
and  "invest  the  proceeds  in  such  other  securities  as  may  in  their  judg- 
ment be  best,"  it  did  not  give  the  trustee  unlimited  authority,  and  he 
was  liable  for  loss  on  bonds  of  a  manufacturing  corporation  in  another 
state.  Hart's  Estate,  203  Pa.  480. 

A  provision  that  a  trustee  may  invest  "in  any  property,  real  or 
personal,  that  he  may  see  fit,"  does  not  warrant  an  investment  in  stock 
of  a  manufacturing  corporation.  Pray's  Appeal,  34  Pa.  100. 

When  a  trustee  is  authorized  to  invest  "in  first  class  mortgage 
bonds  of  railroad  companies,"  the  trustee  is  not  liable  when  he  ex- 
ercises ordinary  care  and  prudence  in  selecting  the  securities  of  a  rail- 
road in  another  state.  Bartol's  Estate,  182  Pa.  407. 

Mingling  Funds  -with  Individual  Property. 

Where  a  trustee  mingles  trust  funds  with  his  own  or  invests  in 
his  own  name,  he  is  chargeable  with  interest  and  is  liable  for  any  loss. 
If  he  makes  a  profit  the  beneficiary  may  elect  to  take  such  profit. 
Norris'  Appeal,  71  Pa.  106;  McAllister  v.  Commonwealth,  30  Pa.  536; 
Noble's  Estate,  178  Pa.  460;  Erie  School  Dist.  v.  Griffith,  203  Pa.  123. 

The  rule  applies  to  deposits  in  bank  in  his  own  name.  Common- 
wealth v.  McAllister,  28  Pa.  480;  HemphilPs  Appeal,  18  Pa.  303; 
Columbian  Bank's  Appeal,  147  Pa.  422. 


PENNSYLVANIA.  219 

When  a  trustee  mingles  trust  funds  with  his  own  and  uses  both 
in  his  business,  he  is  liable  for  the  fund  and  may  be  made  to  account 
for  the  share  of  profits  earned  by  the  trust  money.  Eobinett  's  Ap- 
peal, 36  Pa.  174;  Baher's  Appeal,  120  Pa.  33;  Seguin's  Appeal,  103  Pa. 
139;  Hertzler's  Estate,  192  Pa.  531. 

Trust   Strictly   Construed. 

The  creator  of  the  trust  may  authorize  investment  in  other  than 
legal  securities,  but  where  such  a  provision  in  the  trust  instrument  is 
relied  on,  it  is  the  duty  of  the  trustee  to  establish  it  with  the  utmost 
clearness.  Where  a  trustee  has  invested  in  unauthorized  securities  and 
there  is  a  loss,  the  fact  that  he  exercised  good  faith  and  diligence  will 
not  protect  him.  Barker's  Estate,  159  Pa.  518. 

Order  of   Court. 

Where  a  trustee  invests  in  authorized  securities,  an  order  of  court 
is  not  necessary.  It  seems  that  a  court  will  not  authorize  an  invest- 
ment outside  of  the  securities  named  by  the  legislature.  Hoyt's  Estate, 
2  Kulp.  286;  Noble's  Estate,  33  P.  L.  J.  113. 

Depreciation  of  Securities. 

Where  a  trustee  has  made  an  investment  in  good  faith,  and  has 
exercised  ordinary  care  and  prudence  in  selecting  a  legal  investment, 
he  is  not  liable  for  loss  or  depreciation  in  value  of  securities.  Grid- 
land's  Estate,  132  Pa.  479;  BartoPs  Estate,  182  Pa.  407;  Gouldey's 
Estate,  201  Pa.  491. 

Committee  of  Lunatic   or  Drunkard. 

The  statutes  provide  that  a  Committee  of  a  lunatic  or  drunkard, 
under  the  direction  of  the  Court  of  Common  Pleas,  shall  invest  the 
money  of  the  lunatic  or  drunkard  in  such  stocks  or  upon  such  security 
as  shall  be  approved  of  by  such  court.  Purdon's  Digest,  Vol.  2,  p.  2396. 
Although  there  seems  to  be  an  exception  here  to  the  rule  that  a  court 
will  not  authorize  investments  in  corporate  stock  (Commonwealth  v. 
McCounell,  226  Pa.  244),  it  is  likely  that  Article  III,  Sec.  22,  of  the 
Constitution,  applies,  and  that  the  Court  of  Common  Pleas  is  thus 
limited  in  the  investments  which  it  authorizes. 

Guardian. 

There  seems  to  be  no  specific  statute  governing  investments  by 
guardians.  The  Orphans'  Court  has  jurisdiction  over  the  estates  of 
minors,  and  if  a  guardian  would  protect  himself,  an  order  of  court 
should  be  obtained. 


POETO   RICO. 

Statutes    of    1911. 
(With  Amendments  to   1914.) 

Tutors. — Section  3349,  of  the  Statutes,  gives  tutors,  who 
have  charge  of  the  person  and  property  of  infants  and  in- 
competent persons,  power  to  continue  the  business  or  industry 
of  the  person,  to  alienate  personal  property,  the  value  of 
which  does  not  exceed  two  hundred  dollars,  without  judicial 
authorization,  to  loan  and  borrow  money  and  to  withdraw 
capital  for  the  purpose  of  investment. 

Section  3353  provides  that  the  tutor  shall  be  liable  for  in- 
terest at  the  legal  rate  if  he  permits  a  fund  to  remain  unpro- 
ductive. 

Section  3355  prohibits  tutors  from  remunerating  them- 
selves without  an  order  of  court,  and  from  purchasing  the 
trust  property  for  their  own  benefit  without  a  court  order. 

Note. — For  the  general  rules  governing  trustees,  see  Part  I  herein. 


220 


RHODE   ISLAND. 

TRUSTEES    GENERALLY. 

General    Laws,    1909,   p.  904. 
(With  Amendments   to   1914.) 

Sec.  12.  Every  trust  instrument  hereafter  made,  wherein 
no  provision  is  made  to  the  contrary,  shall  be  deemed  to  give 
to  the  trustees  or  trustee  thereunder  for  the  time  being  full 
power,  in  their,  his  or  her  discretion,  or,  if  a  corporation,  in 
the  discretion  of  its  officer  or  committee  duly  authorized,  from 
time  to  time  to  invest,  reinvest  or  change  the  investment,  of 
all  personal  property  held  thereunder  for  the  time  being. 

Order  of  Court. — Section  11  provides  that  the  Superior 
Court  may  decree  a  sale  or  exchange  of  investments  and  may 
direct  the  application  of  the  proceeds  as  shall  be  for  the  best 
interest  of  the  beneficiary. 

Guardians — General  Laws. — Sec.  33,  p.  1174. — Guardians 
may  be  authorized  to  invest  any  money  in  their  hands,  not 
needed  for  the  payment  of  debts  or  for  the  support  or  educa- 
tion of  their  wards,  in  notes  secured  by  mortgage  upon  un- 
incumbered  improved  real  estate  situated  in  this  state,  or  in 
the  bonds  or  other  indebtedness  of  the  United  States  or  of 
this  state,  or  in  the  bonds  or  notes  of  any  city  or  town  in 
this  state,  or  to  make  deposits  thereof  in  any  savings  bank 
or  trust  company  in  this  state  approved  by  the  probate  court, 
as  they  shall  deem  best  for  the  interest  of  his  ward ;  and  may 
also,  under  direction  of  the  probate  court,  invest  any  such 
money  in  real  estate  or  bank  stocks  in  this  state  or  in  such 
other  safe  income-producing  securities  as  the  probate  court 
may  approve. 

Right  to  Sell  and  Reinvest  Does  Not  Devolve  upon  Successor. 

The  right  given  by  the  creator  of  the  trust  to  sell  or  mortgage 
and  reinvest  at  his  discretion  is  a  special  discretionary  power  and  does 

221 


222  STATE   LAWS   AND   DECISIONS. 

not   devolve   upon    a  new   trustee   appointed  by    the    court.     Bailey   v. 
Burgess,    10    E.   I.  422. 

Stocks  and  Bonds. 

There  is  no  statute  or  rule  of  court  in  Ehode  Island  requiring 
investment  of  trust  funds  in  any  particular  securities.  The  rule  of 
prudence  and  good  faith  is  applied.  Where  corporate  stocks  and  bonds 
came  to  the  trustee  from  the  testator  they  were  declared  to  be  proper 
investments  for  the  trustee.  Peckham  v.  Newton,  15  E.  I.  321. 

The  court  indicated  that  it  would  follow  the  Massachusetts  rule 
and  would  not  condemn  an  investment  in  stocks  or  bonds  merely  be- 
cause that  kind  of  security  had  been  selected. 

Continuing  Business. 

When  the  creator  of  the  trust  expressly  provides  for  it,  a  trustee 
may  continue  the  business.  Greene  v.  Greene,  19  E.  I.  619. 

It  is  probable  that  the  converse  of  this  rule  is  true,  and  that  a 
business  may  not  be  continued  unless  there  is  a  specific  provision. 

Power  to  Change  Investments. 

Section  12  of  Chapter  208,  General  Laws,  provides  that  every  trust 
instrument,  when  there  is  no  provision  to  the  contrary,  shall  be  deemed 
to  give  trustees,  in  their  discretion,  full  power  from  time  to  time  to 
invest,  reinvest  or  change  the  investment  of  any  personal  property 
held  by  them  as  trustees.  Moreover,  the  Superior  Court  has  power  to 
direct  trustees  in  the  management  of  property.  Branch  v.  DeWolf,  28 
E.  I.  542. 


SOUTH  CAROLINA. 

Statutes    of    1902. 
(With   Amendments   to   1914.) 

Sec.  2602.  If  any  executor,  or  administrator  with  the  will 
annexed,  having  power  under  the  will  to  dispose  of  the  estate 
or  any  part  thereof,  shall  take  such  security  as  shall  be  clearly 
proved  to  be  insufficient  at  the  time,  such  executors,  or  ad- 
ministrators, and  their  sureties  shall  be  liable  to  make  good 
any  loss  or  damages  that  the  legatees  or  creditors  may  sustain, 
to  be  recovered  by  action  against  such  executors,  or  by  action 
on  the  bond  of  such  administrators,  wherein  such  damages 
shall  be  assessed  by  the  verdict  of  a  jury. 

Duty  to  Invest. 

It  is  the  duty  of  a  guardian  or  other  trustee  to  keep  the  funds 
of  the  estate  securely  invested.  Nance  v.  Nance,  1  S.  C.  220;  Brabham 
v.  Crosland,  25  S.  C.  539. 

But  a  trustee  may  be  guilty  of  a  breach  of  trust  if  he  calls  in 
funds  which  are  already  well  invested.  If  a  trustee  fails  to  invest 
trust  moneys,  the  burden  is  upon  him  to  show  that  it  was  necessary  to 
retain  the  funds  for  the  exigencies  of  the  estate.  Otherwise,  he  is 
chargeable  with  interest.  Burnside  v.  Eobertson,  28  S.  C.  583. 

Executors  are  required  to  invest  funds  within  a  reasonable  time. 
Taveau  v.  Ball,  1  McC.  Ch.  456. 

Discretion. 

A  trustee's  discretion  is  limited  to  the  class  of  investments  favored 
by  the  courts.  Sanders  v.  Rogers,  1  S.  C.  452;  Nance  v.  Nance,  1 
S.  C.  221. 

Guardian. 

There  seems  to  be  no  special  statutory  provision  governing  guar- 
dians, but  the  management  of  the  estate  is  subject  to  the  control  of 
the  Probate  Court,  and  an  order  of  court  authorizing  any  particular 
investment  or  change  of  investment  is  desirable. 

223 


224  STATE  LAWS  AND  DECISIONS. 

Care  Required. 

The  rule  in  this  state  seems  to  be  that  a  trustee  is  bound  to 
manage  the  property  with  the  care  and  diligence  of  a  prudent  man. 
Crane,  Boyleston  &  Co.  v.  Moses,  13  S.  C.  561. 

Deposit  in  Savings  Bank. 

Where  a  trustee  deposits  funds  in  a  reputable  savings  bank,  and 
the  interest  is  credited  from  time  to  time,  he  cannot  be  held  liable  for 
neglect.  Fitzsimmons  v.  Fitzsimmons,  1  S.  C.  413;  Twittz  v.  Houser,  7 
S.  C.  164. 

Reasonable  Time  Allowed  to  Invest. 

A  trustee  is  allowed  a  reasonable  time  within  which  to  invest. 
The  time  allowed  depends  upon  circumstances.  Crane,  Boyleston  &  Co. 
v.  Moses,  13  S.  C.  561. 

Continuing  Investments  of  Testator. 

A  trustee,  as  soon  as  practicable,  should  change  the  investments 
coming  into  his  hands  into  legal  securities.  Nance  v.  Nance,  1  S.  C. 
218;  Spear  v.  Spear,  9  Rich.  Eq.  184. 

First  Mortgages  and  Public  Securities. 

The  rule  in  this  state  seems  to  be  that  trustees  should  invest  in 
public  securities  or  in  mortgages  on  unencumbered  real  estate  of  a 
value  sufficient  to  guaranty  the  debt  against  all  contingencies  liable 
to  occur.  Bonds  of  individuals  should  not  be  taken  in  lieu  of  real 
securities,  unless  authorized  investments  cannot,  in  the  exercise  of 
reasonable  diligence,  be  secured.  Nance  v.  Nance,  1  S.  C.  224. 

Interest. 

Simple  interest  is  chargeable  against  the  trustee,  unless  it  appears 
that  he  has  mingled  trust  funds  with  his  own  and  subjected  them  to 
the  risks  of  trade  for  his  own  profit  or  has  disregarded  the  pro- 
visions of  the  trust.  In  such  a  case,  compound  interest  may  be  charged. 
Livingston  v.  Wells,  8  S.  C.  363. 

Railroad  Bonds. 

Bonds  of  railroad  corporations  are  personal  securities,  and  are  not 
proper  investments  for  trust  funds.  Allen  v.  Gaillard,  1  S.  C.  279. 

But  in  this  case  the  bonds  were  not  secured  by  a  mortgage  on 
the  property  of  the  road.  Whether  they  would  have  been  a  valid 
investment  if  secured  by  a  first  mortgage  on  the  property  does  not 
appear. 


SOUTH   CAROLINA.  225 

Confederate  Bonds. 

Investments  of  trust  funds  in  Confederate  bonds  prior  to  1864 
were  usually  considered  proper,  but  after  the  fortunes  of  war  had 
turned,  the  courts  looked  upon  such  investments  with  disfavor.  Brab- 
ham v.  Crosland,  25  S.  C.  525;  Dickerson  v.  Smith,  17  S.  C.  289. 

Purchase  of  Land  and  Mortgage  for  Part  of  Purchase  Price. 

The  purchase  of  land  with  trust  funds,  encumbered  with  a  mort- 
gage to  secure  part  of  the  purchase  price,  is  a  breach  of  trust.  Elliott 
v.  Mackorell,  19  S.  C.  238;  Mathews  v.  Heywood,  2  S.  C.  239;  Nance  v. 
Nance,  1  S.  C.  220;  Morton  v.  Adams,  1  Strob.  Eq.  72. 

Deposits  in  Private  Bank. 

Where  a  trustee  deposited  funds  with  his  own  at  a  private  bank, 
and  the  bank  failed  because  of  the  Civil  War,  he  was  not  liable  for 
negligence.  It  was  practically  impossible  to  secure  ordinary  invest- 
ments. Crane,  Boyleston  &  Co.  v.  Moses,  13  S.  C.  561. 

But  this  case  was  decided  after  a  consideration  of  the  conditions 
brought  on  by  Civil  War,  and  is  probably  an  exception  to  the  rule 
that  a  trustee  may  not  loan  the  funds  on  mere  personal  security. 
Nobles  v.  Hogg,  36  S.  C.  322. 

Personal   Securities. 

Although  personal  securities  are  considered  as  uncertain  and  usually 
improper  investments,  a  trustee  is  protected  if,  after  the  exercise  of 
reasonable  diligence,  he  can  find  no  better  investment. 

But  he  must  sustain  the  burden  of  showing  that  such  an  invest- 
ment was  necessary.  Singleton  v.  Lowndes,  9  S.  C.  465;  Nance  v. 
Nance,  1  S.  C.  220. 

The  fact  that  such  securities  were  regarded  as  safe  by  men  of 
prudence  and  were  a  favorite  investment  for  capitalists,  does  not  justify 
investment  in  them,  even  if  the  trustee  acted  in  good  faith.  Allen  v. 
Gaillard,  1  S.  C.  279. 

Stocks. 

A  trustee  may  not  invest  in  corporate  stock,  unless  he  is  so  au- 
thorized by  the  trust  instrument,  and  where  the  creator  of  the  trust 
provides  for  investment  in  "stocks  of  the  City  of  Charleston,"  this 
does  not  authorize  an  investment  in  stocks  of  banks  of  Charleston. 
Womack  v.  Austin,  1  S.  C.  421. 


SOUTH   DAKOTA. 

Code    of    1913. 

Sec.  1639.  A  trustee  must  invest  money  received  by  him 
under  the  trust,  as  fast  as  he  collects  a  sufficient  amount,  in 
such  manner  as  to  afford  reasonable  security  and  interest  for 
the  same. 

Sec.  1640.  If  the  trustee  omits  to  invest  the  trust  moneys 
according  to  the  last  section,  he  must  pay  simple  interest 
thereon  if  such  omission  is  negligent  merely,  and  compound 
interest  if  it  is  willful. 

TRUST    COMPANIES. 

Code    of    1913,    p.    133. 

Sec.  19.  The  directors  of  any  such  corporation  shall  in- 
vest so  much  of  the  capital  stock  as  is  herein  provided  to  be 
deposited  in  the  State  Treasury,  in  bonds  secured  by  mort- 
gages or  notes  and  mortgages  on  unincumbered  real  estate 
within  the  State  of  South  Dakota,  worth  double  the  amount 
secured  thereby,  or  in  bonds  of  the  United  States,  or  any 
state  of  the  United  States  that  has  not  defaulted  on  its  prin- 
cipal or  interest  within  ten  years,  or  of  any  organized  county 
or  township,  or  incorporated  city  or  village,  or  school  district 
in  this  state,  or  in  any  other  such  state,  duly  authorized  to  be 
issued.  And  such  board  of  directors  may  loan  the  balance  of 
this  capital  stock  and  other  moneys  received  by  such  corpora- 
tion in  trust,  in  bonds  secured  by  mortgages,  or  notes  and 
mortgages  on  unincumbered  real  estate  within  the  State  of 
South  Dakota,  worth  double  the  amount  secured  thereby,  or 
in  bonds  of  the  United  States,  or  any  state  of  the  United 
States,  that  has  not  defaulted  on  its  principal  or  interest 
within  ten  years;  or  of  any  organized  county  or  township,  or 
incorporated  city  or  village,  or  school  district  in  this  state,  or 

226 


SOUTH   DAKOTA.  227 

in  any  other  state  duly  authorized  to  be  issued,  or  any  such 
real  or  personal  securities  as  they  may  deem  proper. 

Sec.  20.  No  trust  company  shall  employ  its  money,  di- 
rectly or  indirectly,  in  trade  or  commerce,  by  buying  or  sell- 
ing goods,  chattels,  wares  and  merchandise,  and  shall  not  in- 
vest any  of  its  funds  in  the  stock  of  any  other  trust  com- 
pany or  corporation,  nor  make  any  loans  or  discounts  on  the 
security  of  the  shares  of  its  own  capital  stock,  nor  be  the  pur- 
chaser nor  holder  of  any  such  shares  unless  such  security  or 
purchase  shall  be  necessary  to  prevent  loss  upon  a  debt  pre- 
viously contracted  in  good  faith;  and  stock  so  purchased  or 
acquired  shall  within  six  months  of  the  time  of  its  purchase 
be  sold  or  disposed  of  at  public  or  private  sale;  after  the  ex- 
piration of  six  months  any  such  stock  shall  not  be  considered 
as  a  part  of  the  assets  of  any  trust  company ;  provided,  that  it 
may  hold  and  sell  all  kinds  of  property  which  may  come  into 
its  possession  as  collateral  security  for  loans  or  any  ordinary 
collection  of  debts,  in  the  manner  prescribed  by  law;  pro- 
vided, further,  that  any  goods  or  chattels  coming  into  the 
possession  of  any  trust  company  as  aforesaid  shall  be  disposed 
of  as  soon  as  possible  and  shall  not  be  considered  as  part 
of  the  trust  company's  assets  after  the  expiration  of  six 
months  from  the  date  of  acquiring  the  same. 

Trust  Funds  Must  Be  Kept  Separate. — Section  12,  of  the 
Trust  Company  Law,  provides  that  trust  funds  must  be  kept 
separate  from  the  other  funds  of  the  corporation. 

Trustee  Must  Not  Obtain  Any  Personal  Benefit. 

It  is  the  duty  of  a  trustee  in  a  trust  deed  to  notify  the  person 
for  whom  he  acts  when  interest  and  taxes  come  due,  and  he  may  not 
acquire  any  right  to  the  property  through  a  tax  sale.  Bush  v.  Froelich, 
14  S.  D.  62. 

Guardian. 

The  statutes  provide  that  if  the  estate  of  a  ward  is  sold  for  in- 
vestment, the  guardian  "must  make  the  investment  according  to  his 
best  judgment,  or  in  pursuance  of  any  order  that  may  be  made  by 
the  County  Court."  Compiled  Laws,  1913,  Vol.  2,  p.  527. 

Note. — For  the  general  principles  applicable  to  investments  by 
trustees,  see  Part  I  herein. 


TENNESSEE. 

TRUST    COMPANIES. 

Laws    of    Tennessee,    1903,    Ch.    377. 
(With   Amendments   to   1914.) 

Investments,  Trust  Funds.  Sec.  5. — All  funds  held  by  such 
banks  in  any  of  the  fiduciary  capacities  hereinbefore  in  this 
act  mentioned,  which  as  such  it  has  under  existing  laws, 
power,  authority  or  direction  to  invest,  may,  unless  otherwise 
required  by  the  principal,  or  by  the  court,  or  by  the  person 
creating  the  trust,  agency  or  other  fiduciary  capacity,  buy 
United  States  bonds  or  state  bonds  of  the  State  of  Tennessee, 
or  first  mortgage  bonds  of  any  railroad  company  or  bonds  of 
any  county  or  municipal  corporation;  provided,  that  such 
bonds  shall  at  the  time  of  investment  be  at  par  or  above 
par  value,  in  the  market  where  such  bonds  are  usually  listed 
and  sold,  and  have  regularly  paid  a  dividend  of  not  less  than 
four  per  centum  per  annum  for  the  last  five  years  next  pre- 
ceding such  investment,  or  in  first  mortgages  on  real  estate^ 
provided,  that  no  sum  shall  be  loaned  on  any  mortgage  for 
more  than  fifty  per  cent  of  the  appraised  value  of  the  prop- 
erty mortgaged,  nor  for  a  longer  period  than  ten  years,  and 
whenever  any  funds  in  the  hands  of  any  such  bank  are  in- 
vested by  any  such  bank  as  herein  provided  for,  such  bank 
shall  in  no  case  be  liable  for  any  greater  amount  as  interest 
or  otherwise,  than  the  income,  earnings,  dividend,  interest, 
rents  or  profits  arising  or  derived  from  such  investment,  and 
in  all  settlements  and  accounts  required  of  or  made  by  such 
banks  when  acting  in  any  of  the  fiduciary  capacities  men- 
tioned in  this  act,  where  any  investment  has  been  made  by 
it  as  herein  provided,  such  bank  shall  not  be  required  to 
account  for  or  be  liable  for  any  sum  in  excess  of  the  income, 
earnings,  dividend,  interest,  rent  or  profit  derived  from  such 

228 


TENNESSEE.  229 

investment;  provided,  whenever  a  bank  shall  receive  any 
funds  in  the  character  and  for  the  purpose  herein  declared,  it 
shall  be  the  duty  of  said  bank  to  safely  invest  the  same,  and 
a  failure  to  invest  such  funds  shall  not  release  the  liability  of 
the  bank  for  interest  upon  the  same. 

TRUSTEES    GENERALLY. 

Code    of    1896. 
(With   Amendments  to   1914.) 

Sec.  5433.  The  courts  of  law  and  equity  in  this  state  are- 
hereby  authorized  to  have  the  money  and  funds  in  the  hands 
of  clerks  and  receivers,  or  trustees,  in  litigation  or  under  the 
control  of  said  courts,  invested  in  the  public  stocks  or  bonds 
of  the  United  States,  under  such  rules  and  orders  in  each 
case  as  may  be  legal  and  just. 

Sec.  5434.  Guardians,  executors,  administrators,  and  trus- 
tees, shall  also  be  authorized  and  empowered  to  invest  money 
and  funds  in  their  hands  in  the  public  stocks  or  bonds  of  the 
United  States,  and  make  report  thereof  to  the  county  court 
of  the  county  where  such  guardian,  executor,  administrator, 
or  trustee  resides,  unless  another  mode  of  investment  is  re- 
quired by  will  or  deed  of  the  testator  or  other  person  who 
has  established  the  fund. 

Sec.  4280.  Where  the  profits  of  a  ward's  estate  shall  be 
more  than  sufficient  to  educate  and  maintain  him,  the  guar- 
dian shall  lend  the  surplus,  and  all  other  sums  of  money 
of  the  ward  in  his  hands,  upon  bonds  with  good  and  sufficient 
sureties,  or  by  mortgage  on  real  estate,  the  amount  loaned 
not  to  exceed  one-half  the  real,  actual  value  of  the  real  estate 
mortgaged,  to  be  approved  by  the  court  at  its  next  session,  and 
to  be  repaid  with  interest ;  or  he  may  invest  the  same  in  state 
bonds. 

Personal   Security. 

If  a  trustee  fails  to  follow  the  specific  instructions  of  the  trust 
instrument,  or  invests  the  funds  upon  mere  personal  security,  he  does 
so  at  his  peril.  Wynne  v.  Warren,  49  Tenn.  118. 


230  STATE   LAWS  AND  DECISIONS. 

Purchase  of  Real  Estate. 

In  the  absence  of  express  authority,  a  trustee  has  no  power  to 
purchase  real  estate  as  an  investment.  Lester  v.  Viek,  49  Tenn.  476. 

Deposit  by  Trustee  to  His  Own  Credit. 

Where  a  trustee  deposited  trust  funds  to  his  own  credit  in  his 
business,  not  intending  any  wrong,  and  no  loss  resulting,  although 
there  was  a  technical  breach  of  trust,  he  will  not  be  charged  with  in- 
terest. Vaccaro  v.  Cicalla,  89  Tenn.  63. 

Time  Allowed  for  Investment. 

It  seems  that  three  months  is  considered  a  reasonable  time  within 
which  to  invest  funds.  Vaccaro  v.  Cicalla,  89  Tenn.  63. 

Guardians. 

It  seems  that  by  Code  Sections  4280,  4281,  guardians  may  invest 
upon  bond  with  sufficient  sureties. 

The  law  is  not  clear  upon  what  constitutes  good  and  sufficient 
sureties,  but  the  courts  have  held  guardians  to  a  high  degree  of  care 
in  making  such  investments.  Merriman  v.  Camoran,  9  Bax.  93. 

And  he  must  take  the  security  in  his  name  as  guardian.  Sanders  v. 
Forgasson,  62  Tenn.  249. 

Mingling  Trust  Funds. 

A  trustee  who-  mingles  trust  funds  with  his  own  is  liable  for  the 
whole  fund.  Mason  v.  Whitthorne,  2  Cold.  242. 

Interest. 

A  faithful  trustee  will  not  be  charged  with  more  interest  than  he 
receives.  But  if  he  is  guilty  of  unreasonable  delay  in  investing,  or 
has  used  the  money  for  his  own  profit,  he  will  be  charged  with  in- 
terest. Viccaro  v.  Cicalla,  89  Tenn.  63;  Jones  v.  Ward,  10  Yer.  161. 

In  case  of  fraud  or  gross  neglect,  a  trustee  may  be  charged  with 
compound  interest.  Tarbet  v.  McEeynolds,  4  Hum.  215. 

Decree   of  Court. 

A  decree  of  the  court  of  chancery  is  an  absolute  protection  to  a 
trustee  in  making  an  investment.  Williams  v.  Williams,  84  Tenn.  164. 


TEXAS. 

TRUSTEES    GENERALLY. 

Statutes     of     1911. 
(With   Amendments   to   1914.) 

Art.  3350.     What  Care  to  Take  of  Property  of  Estate.— It 

shall  be  the  duty  of  the  executor  or  administrator  to  take 
such  care  of  the  property  of  the  estate  of  his  testator  or 
intestate  as  a  prudent  man  would  take  of  his  own  property, 
and  if  there  be  any  buildings  belonging  to  the  estate  it  shall 
be  his  duty  to  keep  the  same  in  tenable  (tenantable)  repair, 
extraordinary  casualties  excepted,  unless  directed  not  to  do 
so  by  an  order  of  the  court. 

Art.  3351.  Duty  in  Regard  to  Plantation,  Manufactory  or 
Business. — If  there  be  a  plantation,  manufactory  or  business 
belonging  to  the  estate,  and  the  disposition  thereof  is  not  spe- 
cially directed  by  will,  and  if  the  same  be  not  required  to 
be  at  once  sold  for  the  payment  of  debts,  it  shall  be  the  duty 
of  the  executor  or  administrator  to  carry  on  the  plantation, 
manufactory  or  business,  or  cause  the  same  to  be  done,  or  to 
rent  the  same,  as  shall  appear  to  him  to  be  most  for  the 
interest  of  the  estate.  In  coming  to  a  determination  he  shall 
take  into  consideration  the  condition  of  the  estate  and  the 
necessity  that  may  exist  for  future  sale  of  such  property  for 
the  payment  of  claims  or  legacies,  and  shall  not  extend 
the  time  of  renting  any  of  the  property  beyond  what  may 
consist  with  the  speedy  settlement  of  the  estate. 

TRUST    COMPANIES. 

Art.  538.  Relating  to  Banking. — The  directors  of  banks 
and  trust  companies  created  under  this  act  shall  have  power 
of  investing  the  moneys  placed  in  their  charge  in  loans  se- 

231 


232  STATE   LAWS   AND   DECISIONS. 

cured  by  real  estate  or  other  sufficient  collateral  security,  in 
public  bonds  of  the  United  States  or  of  this  state,  in  the 
bonds  of  any  incorporated  city,  or  county,  or  independent 
school  district  in  this  state. 

GUARDIANS. 

Eevised    Civil    Statutes,    1911. 
(With   Amendments   to   1914.) 

Art.  4140.  If  at  any  time  the  guardian  of  the  estate  shall 
have  on  hand  any  money  belonging  to  the  ward  beyond  what 
may  be  necessary  for  the  education  and  maintenance  of  such 
ward,  such  guardian  shall,  under  the  direction  of  the  court, 
invest  such  money  in  the  bonds  of  the  United  States  or  of 
the  State  of  Texas,  or  loan  the  same  for  the  highest  rate  of 
interest  that  can  be  obtained  therefor. 

Art.  4141.  When  the  guardian  loans  the  money,  he  shall 
take  the  note  of  the  borrower,  the  same  to  be  secured  by 
mortgage  with  power  of  sale  on  unincumbered  real  estate 
situated  in  this  state,  worth  at  least  double  the  amount  of 
such  note  and  interest,  or  on  collateral  notes  secured  by 
vendors'  lien  notes,  as  collateral,  or  may  purchase  vendors' 
lien  notes;  provided,  that  at  least  one-half  has  been  paid  on 
the  land  for  which  said  notes  are  given;  and  he  shall  not 
deliver  such  money  until  such  note  and  security  have  been 
taken  and  approved  by  the  county  judge  of  the  county  in 
which  the  guardianship  is  pending,  which  approval  shall  be  by 
an  order  of  such  judge  entered  upon  the  minutes  of  his  court, 
either  in  term  time  or  vacation. 

Art.  4142.  Nothing  contained  in  the  last  preceding  Article 
shall  relieve  the  county  judge  from  responsibility  on  his  bond 
as  now  provided  by  law. 

Art.  4143.  "When  the  guardian  may  think  it  best  for  his 
ward  to  have  any  surplus  money  on  hand  invested  in  real 
estate,  he  shall  file  an  application  in  writing  in  the  court  where 
the  guardianship  is  pending,  asking  for  an  order  of  such 
court  authorizing  him  to  make  such  investment.  Such  ap- 
plication shall  state  the  nature  of  the  investment  sought  to 


TEXAS.  233 

be  made,  and  the  reasons  why  the  guardian  is  of  the  opinion 
that  it  would  be  for  the  benefit  of  the  ward  to  have  the  same 
made. 

Art.  4150.  If  the  surplus  money  in  the  hands  of  the  guar- 
dian belonging  to  the  ward  cannot  be  invested  or  loaned  at 
interest  as  directed  in  this  chapter,  after  due  diligence  to  do 
so  by  the  guardian,  he  shall  be  liable  for  the  principal  only 
of  such  money.  But  if  the  guardian  neglects  to  invest  such 
money  or  loan  the  same  at  interest  when  he  could  do  so  by 
the  use  of  reasonable  diligence,  he  shall  be  liable  for  the 
principal  and  also  for  the  highest  legal  rate  of  interest  upon 
such  principal  for  the  time  he  so  neglects  to  invest  or  loan 
the  same. 

Neglect  to  Invest. 

If,  by  the  exercise  of  ordinary  diligence,  a  guardian  could  have 
loaned  his  ward's  money,  he  is  liable  for  ten  per  cent  interest  which 
he  could  have  made  by  the  loan.  Freedman  v.  Vallie,  75  S.  W.  322. 

Purchase   of  Real  Estate. 

A  trustee,  in  the  absence  of  authority,  has  no  power  to  purchase 
real  estate  with  trust  funds.  Stone  v.  Kahle,  22  Tex.  Civ.  185. 

Order   of   Court.     Personal   Security. 

Guardians  are  required  to  invest  funds  in  mortgages  on  real 
estate  under  the  approval  of  court.  Investments  in  individual  notes 
with  sureties  are  not  warranted  either  in  law  or  equity.  Smith  v. 
Dibrell,  31  Tex.  239. 

The  statute  must  be  strictly  followed.  Smoot  v.  Eichards,  8  Tex. 
Civ.  146,  and  16  Tex.  Civ.  662;  Smythe  v.  Lumpkin,  62  Tex.  242;  Hurst 
v.  Marshall,  75  Tex.  452. 

Time  Allowed  for  Investment. 

A  trustee  who  has  not  invested  the  trust  funds  within  two  years 
is  guilty  of  negligence.  Murchison  v.  Payne,  37  Tex.  305. 


UTAH. 

TRUSTEES    GENERALLY. 

Compiled    Laws    of    Utah,    1907. 
(With   Amendments   to   1914.) 

Sec.  3917.  Powers  of  Executors.  Continuing  Business. — 
When  the  interests  of  creditors  are  not  prejudiced  thereby, 
the  court  may  prescribe  that  the  business  in  which  the  de- 
ceased was  engaged  at  the  time  of  his  death  may  be  con- 
tinued for  such  length  of  time  as  may  be  necessary  to  permit 
the  affairs  of  the  estate  to  be  wound  up  to  the  best  advantage. 

Sec.  3925.  Court  Order. — Pending  the  settlement  of  any 
estate,  on  the  petition  of  any  party  interested  therein,  and 
upon  good  cause  shown  therefor,  the  court  may  upon  notice 
order  any  moneys  in  the  hands  of  the  executors  or  adminis- 
trators to  be  invested  for  the  benefit  of  the  estate  in  securities 
of  the  United  States  or  other  good  securities  to  be  approved 
by  the  court  or  judge. 

Sec.  3930.  Not  to  Profit.— He  shall  not  make  profit  by 
the  increase,  nor  suffer  loss  by  the  decrease  or  destruction, 
without  his  fault,  of  any  part  of  the  estate.  He  must  ac- 
count for  the  excess  when  he  sells  any  part  of  the  estate 
for  more  than  the  appraisement,  and  if  any  is  sold  for  less 
than  the  appraisement  he  is  not  responsible  for  the  loss  if  the 
sale  has  been  justly  made. 

Sec.  3931.  No  administrator  or  executor  shall  purchase 
any  claim  against  the  estate  he  represents;  and  if  he  pays 
any  claim  for  less  than  its  nominal  value,  he  is  only  entitled 
to  charge  in  his  account  the  amount  he  actually  paid. 

Sec.  4017.  Guardians. — If  the  estate  is  sold  for  the  pur- 
pose of  putting  out  or  investing  the  proceeds,  the  guardian 
must  make  the  investment  according  to  his  best  judgment, 
or  in  pursuance  of  any  order  that  may  be  made  by  the  court. 

234 


UTAH.  235 

Sec.  4018.  The  court,  on  the  application  of  a  guardian 
or  any  person  interested  in  the  estate  of  any  ward,  after 
such  notice  to  persons  interested  therein  as  the  court  shall 
direct,  may  authorize  and  require  the  guardian  to  invest  the 
proceeds  of  sales,  and  any  other  of  his  ward's  money  in  his 
hands,  in  real  estate,  or  in  any  other  manner  most  to  the  in- 
terest of  all  concerned  therein ;  and  the  court  may  make  such 
other  orders  and  give  such  directions  as  are  needful  for  the 
management,  investment,  and  disposition  of  the  estate  and 
effects  as  circumstances  require. 

TRUST     COMPANIES. 

Sec.  429.  Referring  to  Trust  Companies.  Investment  of 
Capital. — Any  corporation  organized  or  existing  under  this 
chapter  shall  keep  its  capital  stock  in  money  on  hand,  or  on  de- 
posit in  solvent  banks,  or  invested  in  the  bonds  of  the  United 
States  or  of  this  state,  or  of  any  county,  municipality,  or 
school  district  thereof,  or  in  first  mortgages  on  real  estate 
situated  in  Utah,  the  amount  invested  in  any  mortgage  not 
to  exceed  fifty  per  cent  of  the  value  of  the  land  so  mort- 
gaged. 

Note. — Whether  or  not  a  trust  company  may  invest  trust 
funds  in  the  securities  above  mentioned  without  an  order  of 
court  is  not  stated.  It  is  probable  that  trustees  may  invest  in 
such  securities  without  an  order  of  court. 

Personal  Benefit. 

Unless  authorized  by  a  court  of  equity,  a  trustee  may  not  pur- 
chase trust  property  either  at  private  or  judicial  sale.  Neither  can 
he  reap  any  personal  benefit  from  the  trust  estate.  Hamilton  v.  Dooly, 
15  Utah  280;  Thum  v.  Wolstenholme,  21  Utah  479. 

Purchase  of  Property. 

In  the  absence  of  authority,  either  from  the  trust  instrument  or 
by  a  court  order,  a  trustee  may  not  purchase  property  with  trust  funds. 
Scheib  v.  Thompson,  23  Utah  564. 

Interest  Chargeable  for  Violation  of  Trusts. 

A  trustee  who  violates  the  trust  by  making  improper  investments 
may  be  charged  compound  interest.  Scheib  v.  Thompson,  23  Utah  564. 


VERMONT. 

TRUSTEES    GENERALLY. 

Statutes    of    1906. 
(With   Amendments   to    1914.) 

Sec.  3009.  Investment  of  Trust  Estate. — The  probate 
court  may,  on  application  of  the  trustee  or  a  person  interested 
in  the  trust  estate,  and  after  notice  to  other  persons  interested, 
authorize  or  require  the  trustee  to  sell  all  or  any  part  of 
the  real  estate,  stock  or  other  personal  estate,  and  invest  the 
proceeds  of  such  sale,  with  moneys  in  the  hands  of  the  trustee, 
in  real  estate,  or  in  such  manner  as  the  court  judges  most 
beneficial  to  those  interested  in  such  trust  estate. 

Sec.  3189.  Guardians. — This  section  is  similar  to  Section 
3009  and  applies  to  guardians. 

TRUST    COMPANIES. 

Laws    of    1910. 

No.  158.  Sec.  73. — A  trust  company  incorporated  under 
the  laws  of  this  state  may  act  as  executor,  administrator, 
guardian,  assignee  or  trustee  "under  the  same  circumstances, 
in  the  same  manner  and  subject  to  the  same  control  by  the 
court  having  jurisdiction,  as  a  natural  person." 

Sec.  77.  Money  Held  in  Fiduciary  Capacity  to  be  Kept 
Separate. — All  moneys,  property  or  securities  received  or  held 
by  a  trust  company  in  the  capacity  of  executor,  administrator, 
receiver,  assignee,  trustee  or  guardian  shall  be  kept  separate 
and  distinct  from  its  general  business,  and  shall  not  be 
mingled  with  the  investments  of  its  assets,  or  be  liable  for 
the  debts  or  obligations  thereof;  neither  shall  the  bank's  de- 
posits and  its  surplus  (other  than  the  trust  guaranty  fund)  be 
liable  for  any  claims  growing  out  of  the  holding  or  manage- 

236 


VERMONT.  237 

ment  of  funds  or  securities  so  received  or  held  except  as  to 
any  balance  remaining  after  the  satisfaction  of  the  demands 
of  other  creditors. 

Authorized  Investments. — There  are  no  specific  provisions 
in  the  Statutes  regulating  investments  by  trustees.  But  the 
Vermont  decisions  are  liberal  toward  trustees  and  it  is  safe 
to  say  that  if  a  trustee  exercises  due  care  in  selecting  from 
investments  which  are  legal  for  savings  banks,  he  will  be 
protected.  The  sections  governing  investments  by  savings 
banks  are  therefore  given. 

Sec.  4648.  Mortgages,  Limited. — No  investment  of  de- 
posits and  surplus  by  savings  banks,  savings  institutions  and 
trust  companies  shall  be  made  upon  mortgages  of  real  estate, 
except  upon  first  mortgages  of  unencumbered  real  estate ;  and 
the  amount  of  such  investments  shall  not  exceed  three-fifths 
of  the  cash  value  of  the  property  mortgaged.  Not  less  than 
one-sixth  of  the  amount  of  such  mortgages  shall  be  upon  real- 
estate  in  this  state,  and  not  more  than  eighty  per  cent  of  the 
amount  of  the  assets  shall  be  invested  in  mortgages  of  real 
estate ;  provided,  that  not  exceeding  sixty  per  cent  of  the 
amount  of  such  assets  may  be  invested  in  mortgages  of  real 
estate  outside  of  this  state.  If  the  investment  is  on  mortgage 
of  unimproved  or  unproductive  real  estate,  the  amount  of  such 
investment  shall  not  be  more  than  forty  per  cent  of  the  value 
thereof;  and  no  mortgage  investment  shall  be  made  by  such 
corporation  except  upon  the  written  approval  of  at  least  three 
trustees  or  their  board  of  investment. 

Sec.  4649.  Capital. — The  capital  of  savings  banks  and 
trust  companies  shall  be  subject  to  the  same  laws  of  invest- 
ment as  are  applicable  to  their  surplus  and  deposits. 

Sec.  4652.  Personal  Security;  Limitation. — No  loans  or 
investments  on  personal  security  shall  be  made  except  upon 
at  least  two  approved  names,  not  less  than  two  of  whom 
reside  in  this  state  or  within  fifty  miles  of  the  institution 
making  such  investment,  or  upon  notes  or  accepted  drafts 
given  by  individuals,  firms  or  corporations  residing  without 
the  state  for  goods  manufactured  within  the  state,  and  pay- 


238  STATE   LAWS   AND   DECISIONS. 

able  to  individuals,  firms  or  corporations  located  within  the 
state;  and  such  personal  loans  or  investments  shall  not  be  for 
a  longer  time  than  one  year ;  and  not  more  than  one-third 
of  the  assets  of  a  savings  bank,  savings  institution  or  trust 
company  shall  be  invested  in  personal  securities. 

Sec.  4654.  Surplus  and  Deposits  of  Savings  Institutions. 
— With  the  foregoing  exceptions,  the  moneys  deposited  in  sav- 
ings banks,  savings  institutions  and  trust  companies  and 
the  income  therefrom,  shall  be  invested  only  as  follows:  in 
the  public  funds  of  the  United  States,  or  public  funds  for  the 
payment  of  principal  and  interest  of  which  the  faith  of  the 
United  States  is  pledged ;  in  the  bonds  or  notes  of  the  counties, 
cities,  towns,  villages  and  school  districts  of  the  New  England 
States,  New  York,  Pennsylvania,  Ohio,  Michigan,  Indiana, 
Illinois  and  Iowa ;  in  the  stock  of  any  national  bank  in  the 
New  England  States,  New  York  and  the  cities  of  Detroit, 
Chicago,  St.  Paul  and  Minneapolis;  in  the  stock  of  any  bank- 
ing association  or  trust  company  incorporated  under  the  au- 
thority of  and  located  in  this  state;  in  the  municipal  bonds, 
not  issued  in  aid  of  the  railroads,  of  counties,  cities  and 
towns  of  five  thousand  or  more  inhabitants  in  the  states  of 
New  Jersey,  Wisconsin,  Minnesota  and  Missouri,  and  in  coun- 
ties, cities  and  towns  of  ten  thousand  or  more  inhabitants  in 
the  states  of  Kansas,  Nebraska,  North  Dakota,  South  Dakota, 
Oregon  and  Washington,  but  no  investment  shall  be  made 
in  any  of  the  counties,  cities  or  towns  in  the  states  above 
mentioned,  except  in  cities  of  fifty  thousand  or  more  in- 
habitants, where  the  municipal  indebtedness  of  such  county, 
city  or  town  exceeds  five  per  cent  of  its  assessed  valuation, 
and  when  not  issued  in  aid  of  railroads ;  in  the  school  bonds 
and  independent  school  district  bonds  of  New  Jersey,  Wis- 
consin, Minnesota  and  Missouri;  and  in  the  school  bonds  and 
independent  school  district  bonds  of  school  districts  of  two 
thousand  or  more  inhabitants  in  the  states  of  Kansas,  Ne- 
braska, North  Dakota,  South  Dakota,  Oregon  and  Washing- 
ton, where  the  amount  of  such  bonds  issued  does  not  exceed 
five  per  cent  of  the  assessed  valuation  of  the  respective  cities, 
towns  and  school  districts ;  in  the  public  funds  of  any  of  the 


VERMONT.  239 

states  named  in  this  section;  in  notes  with  a  pledge  of  any 
of  the  aforesaid  securities,  including  deposit  books  or  deposit 
receipts  issued  by  a  savings  bank,  savings  institution  or  trust 
company,  or  banking  association  located  in  this  state  as  col- 
lateral, such  notes  not  to  exceed  the  par  or  market  value  of 
such  security;  but  no  savings  bank,  savings  institution  or 
trust  company  shall  hold,  by  way  of  investment  or  as  security 
for  loans,  more  than  ten  per  cent  of  the  capital  stock  of  any 
bank,  nor  invest  more  than  ten  per  cent  of  its  deposits,  nor 
more  than  thirty-five  thousand  dollars  in  the  capital  stock  of 
any  one  bank;  and  no  such  investments  shall  be  made  in  the 
capital  stock  of  "any  such  banks  owned  or  loaned  upon,  to 
exceed  in  the  aggregate  one-fourth  of  the  deposits  of  any  sav- 
ings bank,  savings  institution  or  trust  company. 

Sec.  4655.  Limit  of  Loans  on  Personal  Security. — No  sav- 
ings bank,  savings  institution  or  trust  company  shall  loan  to 
any  one  person,  firm  or  corporation  or  the  individual  member 
thereof,  more  than  five  per  cent  of  its  deposits,  nor  more  than 
thirty  thousand  dollars;  nor  shall  such  loans  on  personal  se- 
curity exceed  ten  thousand  dollars  until  its  deposits  amount 
to  one  million  dollars,  after  which  the  sums  so  loaned  may 
be  increased  one  per  cent  of  the  deposits  in  excess  of  the  one 
million  dollars;  but  this  section  shall  not  apply  to  United 
States  bonds  or  municipal  bonds,  or  notes  with  such  bonds 
as  collateral. 

Eepairs. 

A  trustee  will  be  allowed  sums  for  reasonable  repairs  and  the 
erection  of  necessary  farm  buildings.  Field  v.  Wilbur,  49  Vt.  157. 

Mingling   Trust  Funds. 

A  trustee  who  mingles  trust  funds  with  his  own  is  chargeable  with 
any  loss  to  the  estate  and  with  compound  interest,  at  the  highest 
legal  rate,  and  is  not  entitled  to  commissions.  In  re  Hodge's  Estate, 
66  Vt.  70. 

Stocks    and   Bonds. 

There  is  no  special  rule  in  this  state  prohibiting  the  investment 
of  trust  funds  in  stocks  and  bonds  of  private  corporations,  even  if  the 
corporations  are  located  without  the  state.  Scoville  v.  Brock,  81 
Vt.  405. 


240  STATE   LAWS   AND   DECISIONS. 

€are  Required. 

A  trustee  who  exercises  ordinary  prudence  in  selecting  an  invest- 
ment is  protected.  He  is  not  compelled  to  investigate  the  records  of 
a  corporation  before  retaining  stocks  and  bonds  as  an  investment. 
The  opinion  of  well-informed  men  as  to  the  character  of  such  security 
and  its  standing  in  the  market  are  sufficient  evidence.  Scoville  v. 
Brock,  81  Vt.  405. 

Personal   Security. 

A  guardian  lent  some  of  his  ward's  money,  taking  only  the  promis- 
sory note  of  the  borrower.  The  money  was  lost.  The  court  found 
that  the  trustee  had  exercised  due  diligence  and  was  not  liable  for 

the   loss.     Barney   v.    Parsons,    54   Vt.    623. 

• 

Guardians. 

It  seems  that  the  statutes  go  no  further  than  to  provide  that  a 
guardian  must  manage  his  ward's  estate  "frugally  and  without 
waste."  Public  Statutes,  1906,  Sec.  3183. 


VIRGINIA. 

TRUSTEES    GENERALLY. 

Code    of    1904. 
(With   Amendments   to    1914.) 

Sec.  2676.  Liability  of  Fiduciaries,  Agents  and  Attorneys, 
for  Debts  Lost  by  Negligence  or  Failure  to  Make  Defense. — 
If  any  fiduciary  mentioned  before  in  this  chapter,  or  any 
agent  or  attorney-at-law,  shall,  by  his  negligence  or  improper 
conduct,  lose  any  debt  or  other  money,  he  shall  be  charged 
with  the  principal  of  what  is  so  lost,  and  interest  thereon,  in 
like  manner  as  if  he  had  received  such  principal.  And  if 
any  personal  representative,  guardian,  curator  or  committee 
shall  pay  any  debt  the  recovery  of  which  could  be  prevented 
by  reason  of  illegality  of  consideration,  lapse  of  time,  or  other- 
wise, knowing  the  facts  by  which  the  same  could  be  so  pre- 
vented, no  credit  shall  be  allowed  him  therefor. 

Sec.  2700.  Court  May  Order  Money  in  Hands  of  Fidu- 
ciary to  be  Invested. — When  it  appears  by  a  report  made  as 
aforesaid  or  a  special  report  of  the  commissioner,  that  money 
is  in  the  hands  of  any  fiduciary,  the  court,  in  the  clerk's  office 
of  which  said  report  is  filed,  may  order  the  same  to  be  in- 
vested or  loaned  out,  or  make  such  other  order  respecting 
the  same  as  may  seem  to  it  proper. 

Sec.  2700a.  To  Allow  Executors  and  Other  Fiduciaries  to 
Invest  in  Virginia  Three  per  Centum  Bonds  Issued  by  Virtue 
of  an  Act  Approved  February  14,  1882  (Preamble  Omitted). — 
Executors  and  other  fiduciaries  may  invest  in  the  bonds  issued 
under  the  act  approved  February  14,  1882,  commonly  known 
as  the  Riddleburger  bonds,  and  the  same  shall  be  considered 
a  lawful  investment. 

Sec.  2606.  When  Guardian  to  Pay  Compound  Interest  on 
Annual  Balances. — If  any  balance,  whether  of  profits  received 

241 


242  STATE   LAWS    AND   DECISIONS. 

or  estimated,  or  of  interest  or  principal,  be  due  by  any  guar- 
dian, or  other  person  acting  as  guardian,  at  the  end  of  any 
year,  which  ought  to  be  invested  or  loaned  out  within  a 
reasonable  time  for  the  benefit  of  the  ward,  and  the  same 
remain  in  the  hands  of  such  guardian  or  other  person,  he  shall 
be  charged  with  interest  thereon  from  the  end  of  the  year 
in  which  said  balance  arose,  and  so  on  toties  quoties  during 
the  continuance  of  the  trust. 

Sec.  2608.  Time  Within  Which  Guardian  Allowed  to  In- 
vest Funds. — Whenever  a  guardian  shall  collect  any  principal 
or  interest  belonging  to  his  ward,  he  shall  have  thirty  days 
to  invest  or  loan  the  same,  and  shall  not  be  charged  with  in- 
terest thereon  until  the  expiration  of  said  time,  unless  he 
shall  have  made  the  investment  previous  thereto ;  in  which 
case  he  shall  be  charged  with  interest  from  the  time  the  invest- 
ment or  loan  is  made. 

Sec.  399.  Fiduciary  Funds  May  be  Invested  in  These 
Bonds. — Executors,  administrators,  and  others  acting  as  fidu- 
ciaries may  participate  in  the  settlement  of  the  debt  herein 
specified  in  the  manner  hereinbefore  provided,  and  such  action 
shall  be  deemed  a  lawful  investment  of  their  trust  fund.  Ex- 
ecutors, administrators,  and  others  acting  as  fiduciaries  may 
invest  in  the  bonds  issued  under  this  act,  and  the  same  shall 
be  considered  a  lawful  investment.  (This  statute  refers  to  the 
public  debt  of  Virginia  and  the  provisions  for  adjustment  with 
West  Virginia.) 

Time  Allowed  for  Investment. 

Guardians  were  formerly  allowed  six  months  within  which  to  make 
investments  of  the  funds  coming  into  their  hands.  Armstrong  v.  Walkup, 
53  Va.  608;  Hooper  v.  Koyster,  1  Munf.  119.  But  the  statute  now 
requires  that  the  funds  must  be  invested  within  thirty  days.  A  guardian 
who  has  not  made  investments  is  not  to  be  allowed  compensation. 
Jennings  v.  Jennings,  22  Grat.  313.  A  guardian  who  receives  the 
money  of  his  wards,  and  does  not  invest  it,  but  retains  it  in  his 
own  hands,  is  to  be  charged  interest  thereon  from  the  date  of  its 
receipt,  and  not  from  the  end  of  thirty  days  allowed  by  the  statute. 
Snavely  v.  Harkrader,  29  Grat.  113. 


VIRGINIA.  243 

Trustee  May  Retain  Small  Amounts  on  Deposit. 

A  trustee  who  keeps  small  balances  on  deposit  may  not  be  charge- 
able with  interest.  Each  case  depends  upon  its  own  circumstances. 
Wood's  Ex'r  v.  Garnett,  6  Leigh  271. 

Direction  of  Court. 

When  a  receiver,  or  trustee  appointed  by  a  court,  is  ordered  to 
collect  and  invest  a  sum  of  money  for  the  benefit  of  a  person  in 
certain  designated  securities,  he  is  liable  for  loss  if  he  does  not  follow 
strictly  the  instructions  of  the  court.  Carr's  Admr.  v.  Morris,  85  Va. 
21;  Whitehead  v.  Whitehead,  85  Va.  870. 

Deposits  in  Bank. 

Even  where  a  trustee  deposits  trust  funds  in  bank  in  his  own 
name,  he  may  not  be  liable  for  loss  if  the  failure  of  the  bank  is  due 
to  the  general  destruction  of  the  whole  currency.  Parsley's  Admr.  v. 
Martin,  77  Va.  376. 

Good  Faith. 

Trustees  acting  with  reasonable  care  and  prudence  and  exercising 
their  best  judgment  in  good  faith  at  the  time  of  the  transaction  will 
be  protected,  notwithstanding  unforeseen  loss  to  the  estate.  Cooper  v. 
Cooper,  77  Va.  198;  Elliott  v.  Carter,  9  Grat.  559. 

Care  Required. 

In  making  investments  of  the  trust  fund,  a  trustee  is  required  to 
exercise  the  same  care  and  prudence  that  the  average  man  would 
exercise  in  his  own  affairs.  Cogbill  v.  Boyd,  77  Va.  450;  Davis  v. 
Harman,  21  Grat.  200. 

Advice   of  Counsel. 

A  claim  by  the  trustee  that  he  acted  under  the  advice  of  counsel 
is  no  excuse  for  a  violation  of  the  trust  or  for  mismanagement.  Cogbill 
v.  Boyd,  77  Va.  450. 

Mortgage  Security. 

A  trustee  who  accepts  a  bond  and  mortgage  upon  real  estate 
whose  value  is  less  than  or  only  equal  to  the  loan,  knowing  that  the 
obligor  on  the  bond  is  of  doubtful  financial  standing,  is  guilty  of 
negligence.  Cogbill  v.  Boyd,  77  Va.  450. 

Interest  Chargeable  Against  Trustee. 

When  a  trustee  is  imprudent  in  his  investments  and  loss  results, 
he  will  be  charged  with  the  loss  and  interest  on  the  fund  at  six 
per  cent.  Cogbill  v.  Boyd,  79  Va.  1. 


244  STATE   LAWS   AND   DECISIONS. 

Personal  Security.     Continuing  Investments. 

A  trustee  should  not  invest  the  funds  of  the  estate  upon  mere 
personal  security.  Neither  is  he  justified  in  retaining  such  investments 
although  they  were  made  by  the  creator  of  the  trust.  Miller  v.  Hoi- 
comb's  Ex 'or.,  50  Va.  674.  But  see  also  Patterson  v.  Horsley,  70  Va. 
263,  271. 

An  administrator  took  over  an  estate  in  which  there  were  railroad 
bonds  of  $6,000  and  a  note  of  the  railroad  for  $4,000.  The  bonds  were 
depreciating  in  value,  but  at  the  request  of  some  of  the  beneficiaries 
the  administrator  held  the  bonds  in  the  hope  that  they  would  later 
appreciate.  He  made  numerous  requests  of  the  road  for  the  payment 
of  the  notes  and  payment  was  promised.  Finally  the  road  failed.  The 
court  decided  that  since  the  funds  had  come  to  the  administrator  in 
this  form  from  the  deceased  and  since  the  administrator  had  exercised 
good  faith,  he  should  not  be  responsible  for  the  loss.  Some  doubt  was 
expressed  as  to  the  freedom  from  liability  on  the  note  for  failure  to 
attempt  to  collect  it.  Watkins  v.  Stewart,  78  Va.  111.  The  ease  can- 
not be  said  to  be  direct  authority  for  the  proposition  that  a  trustee 
may  continue  the  investments  made  by  the  creator  of  the  trust.  The 
case  of  Miller  v.  Holcomb's  Ex 'or.  (supra)  is  probably  better  law. 

Purchase  of  Land. 

A  guardian  has  no  power  to  purchase  land  with  his  ward's  money 
unless  authorized  by  a  court  of  chancery.  Boisseau  v.  Boisseau,  79 
Va.  73. 

Neither  may  he  convert  personalty  into  realty  or  realty  into  per- 
sonalty. Id. 

General  Rule. 

The  general  rule  in  Virginia  as  to  investments  seems  to  be  that 
a  trustee  is  not  responsible  for  loss  of  trust  funds  if  he  has  exercised 
good  faith  and  a  fair  discretion.  Apparently  the  courts  have  accepted 
the  English  rule  as  a  guide.  Elliott  v.  Carter,  50  Va.  541,  559. 

Duty  to  Invest. 

A  trustee  who  retains  trust  funds  for  an  unreasonable  time  is 
chargeable  with  interest.  Lomax  v.  Pendleton,  5  Va.  465;  Beverleys  v. 
Miller,  4  Va.  415;  Fultz  v.  Brightwell,  77  Va.  742;  Elliott's  Admr.  v. 
Howell,  78  Va.  297. 

Mingling   of  Funds. 

Where  a  trustee  mingles  trust  funds  with  his  own  money  and  the 

funds  are  lost,  he  is  liable.  But  it  seems  that  if  the  loss  is  not  due 

either   to  the  failure   of  the  bank   or   the   carelessness   of  the  trustee, 


VIRGINIA.  245 

but  to   an  external  cause,  the  trustee  should  not  be  liable  merely  be- 
cause he  mingled  funds.     Davis  v.  Harmon,  62  Va.  194. 

Investment  Must  be  Judged  as  of  the  Date  Made. 

The  act  of  a  trustee  in  making  an  investment  must  be  judged  in 
connection  with  the  circumstances  at  the  time.  An  investment  in 
Confederate  bonds  sustained.  Myers  v.  Zetelle,  62  Va.  733. 

Loan  on  Real  Estate   Security — Duty  to  Investigate. 

It  is  the  duty  of  a  trustee  to  investigate  the  adequacy  of  the  se- 
curity upon  which  he  loans  trust  funds,  and  if  he  accepts  mortgages 
on  real  estate  which  is  subject  to  liens  and  encumbrances,  he  may  be 
guilty  of  negligence,  even  if  he  has  acted  on  the  advice  of  counsel. 
Burwell  v.  Burwell's  Guardian,  78  Va.  574. 

Delay  in  Recording  Instrument. 

Trustees  who  invest  in  mortgages  must  personally  see  to  it  that 
the  security  is  obtained  before  the  money  is  turned  over,  and  they 
must  be  prompt  in  recording  the  mortgages.  Otherwise  loss  falls  upon 
them.  Cogbill  v.  Boyd,  77  Va.  450. 

Duty  of  Substituted   Trustee. 

Where  a  receiver  or  substituted  trustee  is  appointed  to  continue  a 
trust,  it  is  his  duty  to  inform  himself  as  to  the  legality  of  previous 
investments  and  as  to  the  time  when  securities  may  be  barred  by 
limitations.  Failing  in  this  duty  he  is  liable  for  loss  and  it  is  no 
defense  that  he  relied  upon  the  care  and  prudence  of  the  previous 
trustee.  He  should  inform  himself  as  to  whether,  in  case  of  a  judg- 
ment obtained  by  the  former  trustee,  an  execution  was  issued  and  the 
proper  steps  taken  to  keep  the  judgment  alive.  Rush's  Ex'r.  v.  Steele, 
93  Va.  526. 

Confederate  Bonds  and  Slaves. 

There  are  numerous  cases  dealing  with  the  question  of  the  liability 
of  trustees  who  invested  in  Confederate  bonds  and  slaves.  Generally 
in  these  cases  the  liability  of  the  trustee  for  loss  depended  upon  the 
circumstances.  If  he  invested  in  such  bonds,  after  it  was  generally 
known  that  they  were  depreciating,  he  was  guilty  of  negligence.  Fultz 
v.  Brightwell,  77  Va.  742;  LeGrand's  Admr.  v.  Fitch,  79  Va.  635; 
Douglass  v.  Stephenson's  Ex'r.,  75  Va.  747;  Crouch  v.  Davis,  Ex'r.,  64 
Va.  62;  Crickard's  Ex'r.  v.  Crickard,  66  Va.  410;  Campbell  v.  Campbell, 
63  Va.  649. 


WASHINGTON. 

TRUST    COMPANIES. 

Laws    of    1903. 
(With   Amendments   to   1914.) 

Chapter  176.  Sec.  6.  Loans  to  Officers,  etc.,  Prohibited. — 
No  trust  company  now  in  existence  or  hereafter  organized 
shall  make  any  loan  to  any  officer,  stockholder  or  employee 
from  its  trust  funds,  and  such  trust  company  shall  not  permit 
any  officer,  stockholder  or  employee  to  become  indebted  to  it 
in  any  way  out  of  its  trust  funds;  any  president,  vice-presi- 
dent, •  director,  secretary,  treasurer,  cashier,  teller,  clerk  or 
agent  of  any  such  corporation  who  knowingly  violates  this  sec- 
tion, or  who  aids  or  abets  any  officer,  clerk  or  agent  in  any 
such  violation,  shall  be  guilty  of  a  felony  and  punished  ac- 
cordingly. 

Sec.  9.  Loans,  etc.,  on  Own  Stock. — No  trust  company 
shall  make  any  loan  on  the  security  of  the  shares  of  its  own 
capital  stock,  nor  be  the  purchaser  or  holder  of  any  such 
shares  unless  such  security  or  purchase  shall  be  necessary  to 
prevent  loss  upon  a  debt  previously  contracted  in  good  faith ; 
and  stock  so  purchased  or  acquired  shall  within  one  year 
from  the  time  of  its  purchase  be  sold  or  disposed  of  at  public 
or  private  sale ;  provided,  that  nothing  in  this  section  con- 
tained shall  apply  to  any  loan  made  before  the  passage  of 
this  act. 

TRUSTEES    GENERALLY. 

Statutes    of    1910. 
(With   Amendments   to   1914.) 

Sec.  1545.  Administrator  Not  to  Profit  or  Suffer  Loss. — 
He  shall  not  make  profit  by  the  increase  nor  suffer  loss  by  the 
decrease  or  destruction,  without  his  fault,  of  any  part  of  the 

246  • 


WASHINGTON.  247 

estate.  He  shall  account  for  the  excess  when  he  shall  have 
sold  any  part  of  the  estate  for  more  than  the  appraisement; 
and  if  any  has  been  sold  for  less  than  the  appraisement,  he 
shall  not  be  responsible  for  the  loss  if  the  sale  has  been  justly 
made. 

Sec.  1548.  Shall  Not  Purchase  Claim  Against  Estate. — No 
administrator  or  executor  shall  purchase  any  claim  against 
the  estate  he  represents;  and  if  he  shall  have  paid  any  claim 
for  less  than  its  nominal  value,  he  shall  only  be  entitled  to 
charge  in  his  account  so  much  as  he  shall  have  actually  paid. 

Sec.  1641.  Court  May  Change  Investment. — The  Court 
may,  on  the  application  of  a  guardian  or  any  other  person, 
said  guardian  having  due  written  notice  thereof,  order  and 
decree  any  change  to  be  made  in  the  investment  of  the  estate 
of  any  ward  that  may  to  such  court  seem  advantageous  to 
such  estate. 

Deposit  in  Bank. 

An  executor  may  deposit  funds  of  the  estate  in  a  reputable  bank, 
provided  he  does  so  in  his  name  as  executor.  In  such  a  case  he  is 
not  liable  for  loss.  In  re  Kohler's  Estate,  15  Wash.  613. 

Must  Exercise  Ordinary  Care  and  Good  Faith. 

"Where  a  trustee  has  exercised  good  faith  and  the  care  and  prudence 
of  the  average  person,  it  seems  that  he  will  not  be  liable  for  loss. 
Sharp  v.  Greene,  22  Wash.  677. 

Guardians. 

The  statutes  provide  that  the  guardian  shall  manage  the  estate 
for  the  best  interests  of  the  ward.  They  also  provide  that  "the  court 
may,  upon  application  of  a  guardian  or  any  other  person,  said  guar- 
dian having  due  written  notice  thereof,  order  and  decree  any  change 
to  be  made  in  the  investment  of  the  estate  of  any  ward  that  may 
to  such  court  seem  advantageous  to  such  estate."  Statutes,  Vol.  1,  Sees. 
1636,  1641. 


WEST   VIRGINIA. 

TRUSTEES    GENERALLY. 

Code    of    1913. 

Sec.  3956.  If  any  balance,  whether  of  profits  received  or 
estimated,  or  of  interest  or  principal,  be  due  by  any  guar- 
dian, or  other  person  acting  as  guardian,  at  the  end  of  any 
year,  which  ought  to  be  invested  or  loaned  out  within  a 
reasonable  time,  for  the  benefit  of  the  ward,  and  the  same 
remain  in  the  hands  of  such  guardian  or  other  person,  he 
shall  be  charged  with  interest  thereon  from  the  end  of  the 
year  in  which  such  balance  arose,  and  so  on  toties  quoties  dur- 
ing the  continuance  of  the  trust. 

Sec.  3958.  "Whenever  a  guardian  shall  collect  any  prin- 
cipal or  interest  belonging  to  his  ward,  he  shall  have  thirty 
days  to  invest  or  loan  the  same,  and  shall  not  be  charged 
with  interest  thereon  until  the  expiration  of  said  time,  unless 
he  shall  have  made  the  investment  previous  thereto,  in  which 
case  he  shall  be  charged  with  interest  from  the  time  the  in- 
vestment or  loan  was  made.  (There  is  a  proviso  that  the  guar- 
dian may  apply  each  year  to  the  Circuit  Court  of  Chancery, 
which  has  jurisdiction  over  guardians,  for  instructions  regard- 
ing investments  and  may  thus  be  relieved  from  failure  to  in- 
vest.) 

Sec.  3976.  The  proceeds  of  sale  (of  lands  held  in  trust) 
shall  be  invested  under  the  direction  of  the  court,  for  the  use 
and  benefit  of  the  persons  entitled  to  the  estate,  and  in  case 
of  a  trust  estate,  subject  to  the  uses,  limitations,  and  condi- 
tions, contained  in  the  writing  creating  the  trust.  But  into 
whosesoever  hands  the  said  proceeds  may  be  placed,  the  court 
shall  take  ample  security,  and  from  time  to  time  require  ad- 
ditional security,  if  necessary,  and  make  any  other  proper 
orders  for  the  faithful  application  of  the  fund,  and  for  the 

248 


WEST    VIRGINIA.  249 

management  and  preservation  of  any  property,  or  securities 
in  which  the  same  may  be  invested,  and  for  the  protection 
of  the  rights  of  all  persons  interested  therein,  whether  such 
rights  be  vested  or  contingent. 

Sec.  4049.  When  it  appears  by  a  report  (of  a  fiduciary) 
made  as  aforesaid,  or  a  special  report  of  the  commissioner  of 
accounts,  that  money  is  in  the  hands  of  any  such  fiduciary, 
the  court  before  which  the  report  so  comes  may  order  the 
same  to  be  invested  or  loaned  out,  or  make  such  other  order 
respecting  the  same  as  may  seem  to  it  proper. 

TRUST    COMPANIES. 

Trust  Funds  to  be  Kept  Separate. — Section  4,  of  the  Trust 
Company  Law,  provides  that,  "Every  such  company  shall 
keep  all  trust  funds  and  investments  separate  and  apart  from 
the  assets  of  the  company,  and  all  investments  made  by  the 
said  company  as  fiduciary  shall  be  so  designated  that  the  trust 
to  which  such  investment  shall  belong  shall  be  clearly  shown; 
and  such  funds  shall  be  held  for  the  uses  designated  and  shall 
not  be  liable  for  any  other  obligations  of  such  company." 
There  seem  to  be  no  other  provisions  regarding  investments 
by  trust  companies  of  funds  held  in  trust. 

Deposit  in  Bank. 

A  trustee  may  deposit  trust  funds  in  a  reputable  bank  provided 
he  does  so  in  a  separate  account  from  his  own  and  in  his  name  as 
trustee.  Wagner  v.  Coen,  41  W.  Va.  351. 

Confederate   Bonds. 

As  to  liability  for  investment  in  Confederate  Bonds,  see  Knight  v. 
Watt's  Admr.,  26  W.  Va.  175;  McClure  Admr.  v.  Johnson,  14  W.  Va.  432. 

Must  Know  that  Funds  are  Invested  as  Directed. 

A  trustee  who  paid  a  cashier  of  his  bank  trust  funds  to  be  in- 
vested in  certain  United  States  bonds  and  who  merely  assumed  that 
the  bonds  were  kept  by  the  bank  for  him,  but  never  saw  them,  is 
guilty  of  negligence.  When  it  appeared  later  that  the  cashier  had 
not  purchased  the  bonds,  the  trustee  was  held  liable  for  the  loss.  Key 
v.  Hughes'  Ex'rs.,  32  W.  Va.  184. 


250  STATE   LAWS   AND   DECISIONS. 

English    Bule   Applied. 

It  seems  that  the  responsibility  of  trustees  is  no  less  rigid  in 
West  Virginia  than  it  is  in  England.  Key  v.  Hughes'  Ex'rs.,  32  W. 
Va.  184. 

Time  Allowed  Guardian  to  Invest. 

A  guardian  should  invest  the  money  received  by  him  within  thirty 
days.  Heseht  v.  Calvert,  32  W.  Va.  215. 

Duty  to  Collect  and  Invest. 

It  seems  to  be  the  duty  of  a  trustee  to  call  in  the  estate  and 
invest  in  authorized  securities.  Anderson  v.  Piercy,  20  W.  Va.  282. 

It  is  the  duty  of  a  guardian  to  collect  the  assets  of  the  estate 
and  exercise  care  and  diligence  in  the  management  of  the  property  and 
he  will  be  liable  for  a  good  debt  which  he  fails  to  collect.  Eoush  v. 
Griffith,  65  W.  Va.  752. 


WISCONSIN. 

TRUSTEES    GENERALLY. 

Statutes    of    1911. 
(With   Amendments   to    1914.) 

Sec.  4030.  Power  of  Testamentary  Trustee  to  Sell.— The 
county  court  on  application  of  any  such  trustee  or  any 
person  interested,  may,  after  notice  to  all  parties  in  in- 
terest, authorize  and  require  such  trustee  to  sell  any  prop- 
erty so  held  in  trust  in  such  manner  as  the  court  may 
direct  and  to  invest  the  proceeds  of  such  sale  in  such  manner 
as  will  be  most  for  the  interest  of  all  concerned  therein;  and 
such  court  may  from  time  to  time  make  such  orders  and 
decrees  as  it  may  deem  just  and  reasonable  in  relation  to  the 
sale,  management,  investment  and  disposition  of  such  trust 
property  and  to  the  settlement  of  the  accounts  of  such  trustee, 
but  no  such  order  shall  be  made  in  violation  of  the  terms  of 
the  trust.  To  keep  the  trust  property  from  being  removed 
out  of  the  state  or  improperly  or  illegally  used  or  invested, 
the  county  court  shall  have  the  same  power  as  surrogate 
courts  to  issue  the  writ  of  ne  exeat  and  injunctions. 

Sec.  3986.  Power  of  Guardian  to  Sell. — The  county  courts, 
in  their  respective  counties,  on  the  application  of  a  guar- 
dian or  of  any  person  interested  in  the  estate  of  any  ward, 
after  such  notice  to  all  persons  interested  therein  as  the 
court  shall  direct,  may  authorize  or  require  the  guardian 
to  sell  and  transfer  any  stock  in  public  funds  or  in  any 
bank  or  other  corporation,  or  any  other  personal  estate  or 
effects  held  by  him  as  guardian  and  to  invest  the  proceeds 
of  such  sale  and  also  any  other  moneys  in  his  hands  in 
real  estate  or  in  any  other  manner  that  shall  be  most  for 
the  interest  of  all  concerned  therein;  and  the  said  court  may 
make  such  further  orders  and  give  such  directions  as  the  case 

251 


252  STATE  LAWS  AND  DECISIONS. 

may  require  for   managing,  investing  and  disposing  of  the 
estate  and  effects  in  the  hands  of  the  guardian. 

Statutes    of    1911. 

Sec.  2100b.  Every  executor,  guardian  or  trustee,  except 
where  it  is  otherwise  expressly  directed  by  the  will  or  instru- 
ment of  trust,  if  any,  may  invest  trust  funds  in  governmental 
and  real  estate  securities  as  provided  by  law,  and  also  in  the 
bonds  of  any  state  of  the  United  States,  except  the  states  of 
Nevada  and  "Wyoming,  and  except  also  the  present  territories 
of  the  United  States  (and  such  territories  shall  continue  to  be 
excepted  after  admission  to  statehood).  In  the  bonds  of  any 
city,  village  or  county  in  the  State  of  Wisconsin,  and  also  in  the 
bonds  of  any  county  in  any  other  of  the  states  included  herein, 
having  a  population  of  not  less  than  twenty-five  thousand,  and 
also  in  the  bonds  of  any  county  in  any  other  of  the  states  in- 
cluded herein  having  a  population  of  not  less  than  thirty-five 
thousand,  provided  that  such  city,  county  or  village  shall  not 
have  defaulted  in  the  payment  of  any  of  its  bonded  indebted- 
ness during  ten  years  immediately  preceding  such  investment, 
and  provided,  further,  that  the  existing  indebtedness  of  any 
such  city  or  county  be  restricted  under  the  laws  of  the  state 
wherein  it  may  be  situated  to  a  sum  in  the  aggregate  not  ex- 
ceeding five  per  centum  on  the  value  of  the  taxable  property 
therein,  to  be  ascertained  by  the  last  assessment  for  the  state 
and  county  taxes  previous  to  the  incurring  of  such  indebted- 
ness. In  the  mortgage  bonds  or  preferred  stock  of  any  steam 
railway  or  railroad  corporation  in  the  United  States  owning 
and  operating  not  less  than  five  hundred  miles  of  track,  which 
has  paid  dividends  upon  its  entire  capital  stock  for  ten  years 
immediately  preceding  such  investment.  In  promissory  notes, 
which  are  or  may  be  amply  secured  by  pledge  of  any  of  the 
bonds,  stock  or  securities  in  which  investment  is  hereinbefore 
authorized. 

Nothing  herein  contained  shall  be  construed  to  affect  the 
power  or  jurisdiction  of  any  court  of  the  State  of  "Wisconsin 
in  respect  to  trusts  and  trustees,  nor  to  affect  any  powers  or 


WISCONSIN.  253 

authority  as  to  investments  conferred  by  will  or  other  instru- 
ment of  trust. 

TRUST   COMPANIES. 
Statutes    of    1911. 

Sec.  2024-77m.  Every  Such  Corporation  Shall  Keep  its 
Trust  Accounts  in  Books  Separate  from  its  Own  General  Books 
of  Account. — All  funds  and  property  held  by  it  in  a  trust 
capacity  shall,  at  all  times,  be  kept  separate  from  the  funds 
and  property  of  the  corporation,  and  all  deposits  by  it  of  such 
funds  in  any  banking  institution  shall  be  deposited  as  trust 
funds  to  its  credit  as  trustee,  and  not  otherwise.  Every  se- 
curity in  which  trust  funds  or  property  are  invested,  shall,  at 
once,  upon  the  receipt  thereof,  be  transferred  to  it  as  trustee, 
executor,  administrator,  guardian,  receiver,  assignee  or  other 
trustee,  as  the  case  may  be,  for  each  particular  trust  or  fund 
by  name  and  immediately  entered  in  the  proper  books  as  be- 
longing to  the  particular  trust  whose  funds  have  been  invested 
therein.  Any  change  in  such  investment  shall  be  fully 
specified  in  and  under  the  account  of  the  particular  trust  to 
which  it  belongs,  so  that  all  trust  funds  and  property  shall 
be  readily  identified  at  any  time  by  any  person. 

Sec.  2024-77n.  It  shall  not  loan  its  fund,  trust  or  other- 
wise, to  any  salaried  officer  or  employee,  nor  shall  any  such 
officer  or  employee  become,  in  any  manner,  indebted  to  it  by 
means  of  an  overdraft,  promissory  note,  account,  endorsement, 
guaranty  or  any  other  contract;  nor  shall  such  corporation 
establish  more  than  one  office  of  deposit  nor  establish  nor 
maintain  branches. 

Transfer  of  Securities  Owned  by  Trust  Company  to  Trust 
Estate. — Section  2024-77k  provides  expressly  that  a  trust  com- 
pany which  owns  securities  which  are  legal  investments  for 
trustees  may  transfer  them  to  a  trust  estate  the  same  as 
if  the  securities  were  owned  by  a  third  person. 

Dealing  with  Trust  Property. 

A  trustee  is  not  permitted  to  purchase  the  trust  property  or  to 
deal  with  it  for  his  own  benefit.  Such  transactions  are  presumptively 


254  STATE    LAWS   AND   DECISIONS. 

fraudulent,  and  the  beneficiary  is  not  bound  thereby.  Ludington  v. 
Patton,  111  W.  208;  Cook  v.  Berlin  Woolen  Mill  Co.,  43  W.  433;  Gillett 
v.  Gillett,  9  W.  194. 

Deposit  in  Bank. 

A  trustee  may  deposit  trust  funds  in  a  bank  of  good  standing,  but 
he  must  do  so  in  his  name  as  trustee,  or  executor  or  guardian.  Wil- 
liams v.  Williams,  55  W.  800;  Booth  v.  Wilkinson;  78  W.  652;  O'Connor 
v.  Decker,  95  W.  202. 

Must  Observe  Strictly  the  Terms  of  the  Trust  Instrument. 

Where  the  trust  instrument  provided  that  the  trustee  should  invest 
in  "United  States  bonds,  or  other  safe  manner,"  it  would  seem  that 
the  other  investments  should  be  as  safe  as  United  States  bonds.  If  an 
investment  is  made  in  any  other  manner,  it  should  be  absolutely  safe 
and  protected  by  ample  security.  There  is  a  question  whether  or  not 
a  trustee  who  invests  in  other  securities  does  not  become  an  insurer 
of  such  investment.  Andrew  v.  Schmitt,  64  W.  664. 

But  where  the  powers  conferred  by  the  trust  instrument  are  broad 
and  indicate  clearly  that  the  trustee  shall  not  be  restricted  to  legal 
securities,  the  trustee  is  bound  only  to  exercise  good  faith  and  pru- 
dence. In  re  Allis'  Estate,  123  W.  223. 

Duty  to  Invest. 

It  is  the  duty  of  a  trustee  to  invest  a  trust  fund  in  accordance 
with  the  provisions  of  the  instrument  creating  the  trust,  or  in  legal 
securities.  If  he  fails  to  invest  he  will  be  charged  with  interest  at 
the  rate  which  he  could  have  obtained  upon  real  estate  security  of  the 
proper  character,  or  with  the  common  rate  of  interest.  Andrew  v. 
Schmitt,  64  W.  664. 

Government  and  Eeal  Estate   Securities. 

Formerly  a  trustee  was  not  protected  against  loss  unless  he  invested 
in  government  or  real  estate  securities,  or  unless  he  secured  the  approval 
of  the  court  for  investment  in  other  securities.  Simmons  v.  Oliver, 
74  W.  633. 

In  recognition  of  the  decision  in  this  case,  the  legislature  passed  a 
law  (Laws  of  1903,  Ch.  317)  authorizing  only  such  investments.  The 
purpose  of  the  act  was  to  extend  the  field  for  investments,  provided 
the  trustee  first  obtained  an  order  of  court.  No  other  investment 
came  within  the  protection  of  the  law.  In  re  Allis'  Estate,  123 
W.  223.  But  Section  2100b,  of  the  statutes  as  amended  in  1909,  now 
provides  for  investments  in  certain  named  securities,  including  pre- 
ferred stock  and  railroad  bonds,  without  the  necessity  of  an  order 


WISCONSIN.  255 

of  court.     But  investments  have  now  been  extended  by  Section  2100b 
of  the  Laws  of  1909. 

Business   or  Trade. 

A  guardian  who  invested  his  ward's  money  in  a  trade  was  guilty 
of  conversion  and  became  personally  liable  for  the  fund.  Martin  v. 
Davis,  80  W.  376. 

And  where  a  guardian  who  is  a  member  of  a  partnership,  invests 
his  ward's  money  in  the  business  with  the  consent  of  the  other  part- 
ners, the  debt  becomes  a  partnership  debt.  German  American  Bank 
v.  Magill,  102  W.  582. 

Investments  by  Trust  Company  as  Trustee. 

Section  1791h,  Statutes  of  1898  (no  longer  in  force),  which  gave 
trust  companies  the  right  to  invest  in  certain  named  securities,  "or  in 
such  real  or  personal  securities  as  they  may  deem  proper,"  did  not  apply 
to  funds  held  by  a  trust  company  as  executor,  administrator  or  trustee. 
Such  funds  must  be  invested  in  government  or  real  estate  securities  or  in 
other  securities  which  have  been  approved  by  court  order.  In  re  Allis' 
Estate,  123  W.  223.  The  field  of  investments  has  now  been  extended 
by  Section  2100b,  Statutes  of  1911  (quoted  above),  to  bonds  and  stock 
of  railroads  which  meet  certain  requirements. 

« 
Foreign   Countries — Other  States. 

Even  where  a  testator  gives  his  trustees  "full  authority  to  invest 
the  trust  properties  in  such  manner  as  they  shall  deem  best,  with  no 
responsibility  for  losses,  provided  they  act  honestly  and  in  good  faith," 
they  must  be  held  to  a  reasonable  discretion  and  may  not  invest  the 
fund  beyond  the  jurisdiction  of  the  court,  unless  expressly  authorized 
so  to  do.  Pabst  v.  Goodrich,  133  W.  43. 

Continuing  Business   of   Deceased. 

In  the  absence  of  specific  authority,  a  trustee  has  no  power  to  con- 
tinue the  business  of  a  deceased.  He  has  a  reasonable  time  within 
which  to  close  out  the  business  and  may  purchase  goods  for  that  pur- 
pose where  it  is  necessary  for  the  preservation  of  the  estate.  Beggs, 
Sons  &  Co.  v.  Behrend's  Estate,  145  N.  W.  Rep.  207. 


WYOMING. 

TEUST    COMPANIES. 

Statutes    of    1910. 
(With   Amendments  to   1914.) 

Sec.  4065.  The  board  of  directors  of  any  such  loan  and 
trust  company  are  hereby  authorized  to  invest  the  capital  of 
such  association,  and  such  money  as  they  may  receive  from 
other  persons  or  associations  for  investment,  and  to  keep  the 
same  invested  in  good  securities;  and  it  shall  be  lawful  for 
such  association  to  make  investments  of  its  capital  and  the 
funds  accumulated  by  its  business  and  moneys  received  from 
other  persons  and  associations,  for  investment  as  aforesaid,  or 
any  part  thereof,  in  bonds  and  mortgages  on  unincumbered 
real  estate  and  chattel  property  worth  at  least  double  the 
amount  loaned,  and  also  in  any  and  all  warrants  and  bonds 
of  this  state  or  any  other  state  or  territory,  or  of  the  United 
States,  or  the  bonds  and  warrants  of  any  county,  city,  town 
or  school  district  of  this  state,  legally  authorized  to  issue  such 
warrants  or  bonds. 

Sec.  5576.  Referring  to  an  Executor. — He  shall  not  make 
profit  by  the  increase,  nor  suffer  loss  by  the  decrease  or  de- 
struction, without  his  fault,  of  any  part  of  the  estate.  He 
must  account  for  the  excess  when  he  sells  any  part  of  the 
estate  for  more  than  the  appraisement,  and  if  any  is  sold  for 
less  than  the  appraisement,  he  is  not  responsible  for  the  loss, 
if  the  sale  has  been  justly  made. 

Sec.  5759.  Referring  to  Guardians. — If  the  estate  is  sold 
for  the  purposes  mentioned  in  this  chapter,  the  guardian  must 
apply  the  proceeds  of  the  sale  to  such  purchase,  as  far  as 
necessary,  and  put  out  the  residue,  if  any,  on  interest,  or  re- 
invest it  in  the  best  manner  in  his  power,  until  the  capital 
is  wanted  for  the  maintenance  of  the  ward  and  his  family,  or 

256  i 


WYOMING.  257 

the  education  of  his  children,  or  for  the  education  of  the  ward 
when  a  minor,  in  which  case  the  capital  may  be  used  for  that 
purpose,  as  far  as  may  be  necessary,  in  like  manner  as  if  it 
had  been  personal  estate  of  the  ward. 

Sec.  5760.  Investment  of  Proceeds. — If  the  estate  is  sold 
for  the  purpose  of  putting  out  or  investing  the  proceeds,  the 
guardian  must  make  the  investment  according  to  law. 

Sec.  5772.  Court  May  Order  Investment  of  Funds. — The 
court  or  judge,  on  the  application  of  a  guardian  or  any  person 
interested  in  the  estate  of  any  ward,  after  such  notice  to  per- 
sons interested  therein  as  the  court  or  judge  shall  direct,  may 
authorize  and  require  the  guardian  to  invest  the  proceeds  of 
sales,  and  any  other  of  his  ward's  money  in  his  hands,  in 
real  estate  or  in  any  other  manner  most  to  the  interest  of  all 
concerned  therein;  and  the  court  or  judge  may  make  such 
other  orders  and  give  such  directions  as  are  needful  for  the 
management,  investment  and  disposition  of  the  estate  and 
effects  as  circumstances  require. 

Note. — There  are  no  decisions  by  the  higher  courts  relating 
directly  to  the  investment  of  trust  funds.  For  the  general 
rules  applicable,  see  Part  I,  herein. 


PART    III. 

Typical  List  of  State,  Municipal  and  Railroad  Bonds  Which 
Are  Legal  in  Three  of  the  Principal  States  and  Which 
May  Serve  as  a  Guide  to  Trustees  in  Those  States  Which 
Permit  Trustees  to  Invest  in  Such  Bonds. 

The  following  list  of  state,  municipal  and  railroad  bonds, 
which  are  legal  investments  in  three  of  the  leading  states,  is 
given  in  order  that  trustees  in  other  states  which  permit  in- 
vestment in  securities  of  this  character  may  have  a  guide. 
The  lists  for  Massachusetts  and  Connecticut  have  been  se- 
cured from  the  banking  commissioners  of  those  states  and  are 
the  most  recent  published  information  on  the  subject.  The 
list  for  New  York  has  been  compiled  from  the  tables  of  Messrs. 
White  &  Kemble  and  by  the  kind  assistance  of  Mr.  H.  D. 
Bobbins,  of  N.  W.  Halsey  &  Co.,  and  Mr.  W.  S.  Scott,  of  Wm. 
A.  Read  &  Co.  We  believe  that  it  is  entirely  reliable. 

The  lists  may  change  from  time  to  time,  but  the  securities 
given  are  not  subject  to  great  fluctuation  in  value,  and  are 
likely  to  remain  legal  investments  for  trustees  and  savings 
banks. 

A  list  of  legal  investments  adopted  by  the  Supreme  Bench 
of  Baltimore  has  been  given  at  page  110,  and  it  is  safe  to  assume 
that  these  securities  are  legal  generally  throughout  the  state 
of  Maryland. 

May  we  suggest,  in  conclusion,  that  each  state  could  render 
a  real  service  to  trustees  by  following  the  practice  of  Massa- 
chusetts and  Connecticut  in  having  the  state  banking  de- 
partment prepare  and  publish  a  list  of  investments  which  are 
legal  for  savings  banks  and  trustees.  A  convenient  source 
of  reliable  information  would  thus  be  provided  and  a  trustee 
would  not  be  compelled  to  rely  upon  the  advice  of  individuals 

258 


LIST   OF   INVESTMENTS.  259 

or  corporations,  or  the  lists  prepared  by  them.  Such  a  ser- 
vice by  the  state  would  cost  little  in  comparison  with  its  great 
value  to  the  many  savings  banks  and  trustees  who  are  com- 
pelled to  select  legal  investments.  Recognizing  this  fact,  the  new 
banking  law  for  the  State  of  New  York  provides  that  hereafter 
the  banking  department  shall  prepare  such  a  list  of  securities.  ' 


CONNECTICUT. 

First.    Bonds  of  the  United  States  and  District  of  Columbia. 
United  States  Bonds,  2s,  1930;  United  States  Bonds,  3s, 
1918  j  United  States  Bonds,  4s,  1925 ;  U.  S.  Panama  Canal 
2s,  1936;  U.  S.  Panama  Canal  3s,  1961;  District  of  Co- 
lumbia, 3.65s,  1924. 

Second.    State  Bonds. 

*  California  Montana 

Colorado  Nevada 

Connecticut  New  Hampshire 

Delaware  New  York 

Florida  North  Dakota 

Idaho  Pennsylvania 

Indiana  Rhode  Island 

Kansas  South  Dakota 

Kentucky  Tennessee 

Maine  Texas 

Maryland  Vermont 

Massachusetts  "Washington 

Minnesota  Wisconsin 

Missouri  Wyoming 

Third.  Legally  issued  bonds  and  obligations  of  any  county, 
town,  city,  borough,  school  district,  fire  district,  or  sewer 
district  in  the  State  of  Connecticut.  . 

Fourth.    Cities  outside  of  Connecticut. 

Akron,  Ohio  Altoona,  Pa. 

Alameda,  Cal.  Amsterdam,  N.  Y. 

Albany,  N.  Y.  Anderson,  Ind. 

Allentown,  Pa.  Atlantic  City,  N.  J. 

260 


CONNECTICUT. 


261 


Auburn,  N.  Y. 
Aurora,  111. 
Baltimore,  Md. 
Bangor,  Me. 
Battle  Creek,  Mich. 
Bay  City,  Mich. 
Beaumont,  Tex. 
Bellingham,  "Wash. 
Berkeley,  Cal. 
Binghamton,  N.  Y. 
Bloomington,  111. 
Boston,  Mass. 
Brockton,  Mass. 
Buffalo,  N.  Y. 
Burlington,  Vt. 
Burlington,  Iowa 
Butte,  Mont. 
Cambridge,  Mass. 
Camden,  N.  J. 
Canton,  Ohio 
Cedar  Rapids,  Iowa 
Chelsea,  Mass. 
Chester,  Pa. 
Chicago,  111. 
Cincinnati,  Ohio 
Cleveland,  Ohio 
Cohoes,  N.  Y. 
Colorado  Springs,  Colo. 
Columbus,  Ohio 
Concord,  N.  H. 
Council  Bluffs,  Iowa 
Covington,  Ky. 
Cranston,  R.  I. 
Cumberland,  Md. 
Dallas,  Tex. 
Danville,  111. 
Davenport,  Iowa 
Dayton,  Ohio 


Decatur,  111. 
Denver,  Colo. 
Des  Moines,  Iowa 
Detroit,  Mich. 
Dubuque,  Iowa 
Duluth,  Minn. 
Easton,  Pa. 
East  Liverpool,   Ohio 
East  St.  Louis,  111. 
Elgin,  111. 
Elizabeth,  N.  J. 
Elmira,  N.  Y. 
El  Paso,  Tex. 
Erie,  Pa. 
Evansville,  Ind. 
Fall  River,  Mass. 
Fitchburg,  Mass. 
Flint,  Mich. 
Fort  Wayne,  Ind. 
Fresno,  Cal. 
Galesburg,  111. 
Gloucester,  Mass. 
Gloversville,  N.  Y. 
Grand  Rapids,  Mich. 
Green  Bay,  Wis. 
Hamilton,  Ohio 
Hammond,  Ind. 
Harrisburg,  Pa. 
Haverhill,  Mass. 
Hoboken,  N.  J. 
Holyoke,  Mass. 
Indianapolis,  Ind. 
Jackson,  Mich. 
Jacksonville,  Fla. 
Jamestown,  N.  Y. 
Jersey  City,  N.  J. 
Joliet,  111. 
Joplin,  Mo. 


262 


LIST   OP   INVESTMENTS. 


Kalamazoo,  Mich. 
Kansas  City,  Kan. 
Kansas  City,  Mo. 
Kenosha,  Wis. 
Kingston,  N.  Y. 
Knoxville,  Tenn. 
LaCrosse,  Wis. 
Lafayette,  Ind. 
Lancaster,  Penn. 
Lansing,  Mich. 
Lawrence,  Mass. 
Lewiston,  Me. 
Lexington,  Ky. 
Lima,  Ohio. 
Lincoln,  Nebraska. 
Los  Angeles,  Cal. 
Louisville,  Ky. 
Lowell,  Mass. 
Lynn,  Mass. 
Madison,  Wis. 
Maiden,  Mass. 
Manchester,  N.  H. 
Mansfield,  Ohio 
Milwaukee,  Wis. 
Moline,  111. 
Muncie,  Ind. 
Muskegon,  Mich. 
Nashua,  N.  H. 
Newark,  N.  J. 
Newark,  Ohio 
New  Albany,  Ind. 
New  Bedford,  Mass. 
New  Brunswick,  N.  J. 
Newburgh,  N.  Y. 
New  Castle,  Pa. 
Newport,  Ky. 
Newport,  R.  I. 
Newton,  Mass. 


Oakland,  Cal. 
Omaha,  Neb. 
Oshkosh,  Wis. 
Oswego,  N.  Y. 
Ottumwa,  Iowa 
Paducah,  Ky. 
Pasadena,  Cal. 
Passaic,  N.  J. 
Paterson,  N.  J. 
Pawtucket,  R.  I. 
Peoria,  111. 
Perth  Amboy,  N.  J. 
Philadelphia,  Pa. 
Pittsburgh,  Pa. 
Plainfield,  N.  J. 
Portland,  Me. 
Portland,  Ore. 
Portsmouth,  Ohio 
Providence,  R.  I. 
Quincy,  111. 
Quincy,  Mass. 
Racine,  Wis. 
Reading,  Pa. 
Richmond,  Ind. 
Rochester,  N.  Y. 
Rockford,  111. 
Rock  Island,  111. 
Rome,  N.  Y. 
Sacramento,  Cal. 
Saginaw,  Mich. 
St.  Joseph,  Mo. 
St.  Louis,  Mo. 
St.  Paul,  Minn. 
Salem,  Mass. 
San  Antonio,  Tex. 
San  Francisco,  Cal. 
Schenectady,  N.  Y. 
Scranton,.  Pa. 


CONNECTICUT.  263 

Sheboygan,  Wis.  Toledo,  Ohio 

Shenandoah,  Pa.  Topeka,  Kan. 

Sioux  City,  Iowa.  Trenton,  N.  J. 

Somerville,  Mass.  Troy,  N.  Y. 

South  Bend,  Ind.  Utica,  N.  Y. 

South  Omaha,  Neb.  Waco,  Tex. 

Springfield,  111.  Waltham,  Mass. 

Springfield,  Mass.  Waterloo,  Iowa 

Springfield,  Mo.  Watertown,  N.  Y. 

Springfield,  Ohio  Wichita,  Kan. 

Stockton,  Cal.  Wilkes-Barre,  Pa. 

Steubenville,  Ohio  Williamsport,  Pa. 

Syracuse,  N.  Y.  Worcester,  Mass. 

Tacoma,  Wash.  York,  Pa. 

Taunton,  Mass.  Youngstown,  Ohio 

Terre  Haute,  Ind.  Zanesville,  Ohio. 

Fifth.    Railroad  Bonds 

BONDS  OF  NEW  ENGLAND  COMPANIES. 

Boston  &  Albany  R.  R Debentures 3!/£s,  1951 

"    "  "     3i/2s,  1952 

"  "     4s,  1933 

"  "     4s,  1934 

"  "     4s,  1935 

"  "     4y2s,  1937 

"  "     5s,  1938 

"  "     5s,  1963 

Boston  &  Lowell  R.  R Debentures 4s,  1915 

"  "     4s,  1916 

"  "     4s,  1917 

"  "     4s,  1918 

"   '"  "     4s, -1926 

"  ._   "     4s,  1927 

11    "  ^.    "     4s,  1929 

"  ...:.......    "    4s,  1932 

"  "     3y2s,  1919 

"  "     3i/os,  1921 


264  LIST  OF  INVESTMENTS. 

Boston  &  Lowell  R.  R Debentures   3y2s,  1923 

"  "        ll     "  3y2s,  1925 

"     "  4i/2s,  1933 

Concord  &  Montreal  R.  R Consolidated    4s,  1920 

"     Debentures 4s,  1920 

"     "  3i/2s,  1920 

Connecticut  River  R.  R Debentures 3%s,  1921 

11  "         "    "  3i/2s,  1923 

"    "  4s,  1943 

Conn.  &  Passumpsic  River  R.  R 4s,  1943 

Fitchburg  R.  R Debentures 4s,  1915 

"     "  4s,  1916 

" "  4s,  1920 

"     "  3i/2s,  1920 

"     , "  3i/2s,  1921 

" "  4s,  1925 

" "  4s,  1927 

" "  4s,  1928 

11     .., "  4s,  1937 

"     "  4y2s,  1928 

"     ,.. "  4i/2s,  1932 

"  " "  4i/2s,  1933 

"     ,.. "  5s,  1934 

Troy  &  Boston  R.  R First 7s,  1924 

Vermont  &  Mass.  R.  R Plain   3%s,  1923 

MAINE  CENTRAL  SYSTEM. 

Belfast  &  Moosehead  Lake  R.  R. . First    4s,  1920 

Collateral  Trust 5s,  1923 

Consolidated  Refunding 5s,  1961 

Dexter  &  Newport  R.  R First    4s,  1917 

Dexter  &  Piscataquis  R.  R "      4s,  1929 

European  &  No.  American  Ry. ...     "      4s,  1933 

Knox  &  Lincoln  Ry 5s,  1921 

Maine  Shore  Line  R.  R First    6s,  1923 

Notes 5s,  1919 

Portland  &  Ogdensburg  Ry First .4y2s,  1928 


CONNECTICUT.  265 

Portland  Terminal  Co.  (Guar.) .  .First    4s,  1961 

Portland  &  Rumford  Falls  Ry . .  Consolidated    4s,  1926 

Penobscot  Shore  Line  R.  R First    4s,  1920 

Somerset  Railway "      5s,  1917 

Consolidated    4s,  1950 

First  and  Ref 'ding. 4s,  1955 

Sinking  Fund  Improvement 4^s,  1916 

4i/2s,  1917 

Upper   Coos  R.  R First    4s,  1930 

"         "     Extension 4y2s,  1930 

New  London  Northern  R.  R First    4s,  1940 


NEW    YORK,    NEW    HAVEN    &    HARTFORD    SYSTEM. 

N.  Y.,  N.  H.  &  H.  R.  R Convertible    3i/2s,  1956 

"    "           6s,  1948 

"    ...Debentures 3y2s,  1947 

"    "           3i/2s,  1954 

"    ,..          "           4s,  1947 

"    "           4s,  1955 

"    "           4s,  1956 

" Eur'p'n  Loan  Deb's. 4s,  1922 

Boston  &  New  York  Air  Line ....  First    4s,  1955 

Boston  &  Providence Debentures 4s,  1918 

Branford  Electric  Company First    5s,  1937 

Consolidated  Railway .Debentures 4s,  1954 

"           4s,  1955 

"           4s,  1956 

"    3s,  3i/2s  and  4s,  1930 

Cent.  New  England  Ry.  (Guar) .  .Refunding    4s,  1961 

Danbury  &  Norwalk  R.  R Consolidated  5s  and  6s,  1920 

"    General 5s,  1925 

"    Refunding    4s,  1955 

Greenwich  Tramway  Company . . .  First    5s,  1931 

Harlem  River  &  Port  Chester 4s,  1954 

Hartford  Street  Railway First    4s,  1930 

"       Debentures 4s,  1930 


266  LIST  OP  INVESTMENTS. 

Hartf  'd,  Man.  &  Rockville  Ty.  Co.First    5s,  1924 

Holyoke  &  Westfield  R.  R "      4^8,  1951 

Housatonic  Railroad  Consolidated    5s,  1937 

Meriden  Horse  R.  R ' "  5s,  1924 

Meriden,  South.  &  Com.  Ty.  Co.  .First    5s,  1928 

Middletown  Horse  Ry "      5s,  1914 

Montville  Street  Ry. . "      5s,  1920 

Naugatuck  R.  R "      4s,  1954 

"    Debentures 3y2s,  1930 

New  England  R.  R Consolidated    4s,  1945 

"     "  5s,  1945 

New  Haven  &  Centerville  St.  Ry. First    5s,  1933 

New  Haven  &  Northampton  R.  R.  Refunding    4s,  1956 

New  Haven  &  Derby  R.  R Consolidated    5s,  1918 

New  Haven  Street  Railway Consolidated    5s,  1914 

New  London  Street  Railway. . .  .First    5s,  1923 

N.  Y.  Connecting  Ry.  (Guar.) ...     "      4i/2s,  1953 

New  York  &  Stamf ' d  Ry.  (Guar.).     "      4s,  1958 

N.  Y.,  W.  &  Boston  Ry.  (Guar.).     "      4i/2s,  1946 

N.  Y.,  Providence  &  Boston  R.  R.  General 4s,  1942 

Norwich  Street  Railway First    5s,  1923 

Old  Colony  R.  R Debentures    4s,  1938 

"     , "  4s,  1924 

"     "  4s,  1925 

"     "  3y2s,  1932 

Norwich  &  Worcester  R.  R "  4s,  1927 

Pawtuxet  Valley  R.  R First    4s,  1925 

Providence  &  Springfield  R.  R. . .     "      : 5s,  1922 

Providence  &  Worcester  R.  R. . .     "      4s,  1947 

Providence  Terminal  Co "      4s,  1956 

Portland  Street  Railway "      5s,  1916 

Stafford  Springs  St.  Ry "      5s,  1956 

Torrington  &  Winchester  St.  Ry . .     ' '      5s,  1917 

Worcester  &  Conn.  Eastern "      41/38,  1943 

Sullivan  County  R,  R First    4s,  1924 

Vermont  Valley  R.  R First    4i/2s,  1940 


CONNECTICUT.  267 

ATCHISON,   TOPEKA  &   SANTA  FE   SYSTEM. 

General  Mortgage   4s,  1995 

Chicago  &  St.  Louis  Ry First  6s,  1915 

Chic.,  Santa  Fe  &  California  Ry . .     ' '  5s,  1937 

Eastern  Oklahoma  Division "  4s,  1928 

Hutchinson  &  Southern  Ry "  5s,  1928 

San  Fran.  &  San  Joaquin  Val.  Ry.     ' '  5s,  1940 

Transcontinental  Short  Line ' '  4s,  1958 

ATLANTIC   COAST   LINE   SYSTEM. 

First  Consolidated  4s,  1952 

Alabama  Midland  Ry First    5s,  1928 

Ashley  River  R.  R " 8s,  1915 

Atlantic  Coast  Line  of  So.  Caro. .     "      4s,  1948 

Brunswick  &  Western  R.  R " 4s,  1938 

Charleston  &  Savannah  Ry "      7s,  1936 

Florida  Southern  R.  R "      4s,  1945 

Northeastern  R.  R Consolidated    6s,  1933 

Norfolk  &  Carolina  R.  R >. .  First    . .  -. 5s,  1939 

"     ..Second    5s,  1946 

Petersburg  R.  R Consolidated  A 5s,  1926 

"    "  B 6s,  1926 

Richmond  &  Petersburg  R.  R First 6s  and  7s,  1915 

"     ....  Consolidated    . . .  .4i/2s,  1940 

Sanford  &  St.  Petersburg  R.  R. . . First 4s,  1924 

Savannah,  Fla.  &  Western  Ry. . .     "       5s  and  6s,  1934 

Silver  Springs,  Ocala  &  Gulf  R.  R.     "      4s,  1918 

Wilmington  &  Weldon  R.  R General. . .  .4s  and   5s,  1935 

Wilmington  &  New  Berne  R.  R. . First    4s,  1947 

BALTIMORE  &   OHIO   SYSTEM. 

Baltimore  &  Ohio  R.  R Extended    4s,  1935 

"    First    4s,  1948 

"    Prior  Lien  3y2s,  1925 

Southwestern   Division    3%s,  1925 

Bait.  &  New  York  R.  R.  (Guar.) . .  First 5s,  1939 

Cleveland  T.  &V.R.  R.  (Guar.)..     "      4s,  1995 


268  LIST  OP  INVESTMENTS. 

Huntlngton  &  Big  Sandy  R.  R First  6s,  1922 

Monongahela  River  R.  R "  . .  v 5s,  1919 

Ohio  River  R.  R "  5s,  1936 

Ravensw'd,  Spen.  &  Glenville  Ry .  "  6s,  1920 

Schuylkill  R.  E.  S.  R.  R.  (Guar.) .  "  4s,  1925 

West  Va.  &  Pittsburg  R.  R "  4s,  1990 

Washington  Term  Co.  (Guar.) ...  "  3%s  and  4s,  1945 

CENTRAL  RAILWAY  OF  NEW  JERSEY. 

General  Mortgage 5s,  1987 

Amer.  Dock  &  Imp.  Co.  (Guar.) .  .First    5s,  1921 

CHICAGO,   MILWAUKEE  &  ST.  PAUL  SYSTEM. 

General  Mortgage   3}/2S,  4s,  and  4i/£s,  1989 

Gen.  and  Ref.  (Not  in  report  but  probably  legal) 4^s,  2014 

Chicago,  Mil.  &  Puget  Sound First    4s,  1949 

Chicago  &  Lake  Superior  Div. ...     "      5s,  1921 

Chicago  &  Mo.  River  Div "      .-.  .5s,  1926 

Chicago  &  Pac.  Western  Div "      5s,  1921 

Dakota  &  Gt.  Southern  Ry "      5s,  1916 

Dubuque  Division "      6s,  1920 

Fargo  &  Southern  Ry "      6s,  1924 

Milwaukee  &  Northern Extended   ^s,  1934 

La  Crosse  &  Davenport  Div First 5s,  1919 

Wisconsin  &  Minn.  Div "      5s,  1921 

Wisconsin  Valley  Div "      6s,  1920 

CHICAGO,  BURLINGTON  &  QUINCY  SYSTEM. 

General  Mortgage 4s,  1958 

Burlington  &  Missouri  River Consolidated    6s,  1918 

Denver  Extension   4s,  1922 

Illinois  Division '.3^s  and  4s,  1949 

Iowa  Division   4s  and  5s,  1919 

Nebraska  Extension 4s,  1927 

Nodaway  Valley  R.  R First    7s,  1920 

Republican  Valley  R.  R "      6s,  1919 

Tarkio  Valley  R.  R "      7s,  1920 


CONNECTICUT.  269 


CHICAGO  &  NORTHWESTERN  SYSTEM. 


General  Mortgage   .......................  3^s  and  4s,  1987 

Boyer  Valley  R.  R  ..............  First    ...........  3i/2s,  1923 

Cedar  Rapids  &  Missouri  R.  R  ____     "      .............  7s,  1916 

Collateral  Trust  ...................................  4s,  1926 

Consolidated  Sinking  Fund  .........................  7s,  1915 

Des  Plaines  Valley  Ry  ..........  First    ...........  4y2s,  1947 

Fremont,  Elkhorn  &  Mo.  Val.  R.R.  Consolidated    ......  6s,  1933 

Iowa,  Minn.  &  Northwestern  Ry.  .First    ...........  3^8,  1935 

Mani.,  Green  Bay  &  Northw'n  Ry.     "      ...........  3y2s,  1941 

Mankato  &  New  Ulm  Ry  ........     "       ...........  3i/2s,  1929 

Minn.  &  So.  Dakota  Ry  ........     "      ...........  3y2s,  1935 

Milwaukee  &  State  Line  Ry  ......     "      ........  ...  3y2s,  1941 

Mil.,  Sparta  &  Northwestern  Ry.  .     "      .............  4s,  1947 

Mil.,  Lake  Shore  &  Western  Ry  .  .     "      .............  6s,  1921 

Ashland  Division  ..........  ,..     "      .............  6s,  1925 

Extension  and  Imp  ...............................  5s,  1929 

Marshfield  Extension  .........  First    .............  5s,  1922 

Michigan  Division  ............     "      .............  6s,  1924 

Minnesota  &  Iowa  Ry  ..........     "      ...........  3y2s,  1924 

Northwestern  Union  Ry  .........     "      .............  7s,  1917 

Princeton  &  Northwestern  Ry  ____     "      ...........  3^s,  1926 

Peoria  &  Northwestern  Ry  ____  .  .     "      ...........  3^s,  1926 

Sioux  City  &  Pacific  R.  R  ........     "      ...........  3y2s,  1936 

St.  Louis,  Peoria  &  Northwest  'n.     "      .............  5s,  1948 

Southern  Iowa  Ry  ..............     "      ...........  3i/2s,  1925 

St.  Paul  East'n  G.  T.  Ry.  (Guar.).     "      ...........  4i/2s,  1947 

Winona  &  St.  Peter  R.  R  .......  Extended    .........  7s,  1916 

Wisconsin  Northern  ............  First  ..............  4s,  1931 

CHICAGO,  ST.  PAUL,  MINNEAPOLIS  &   OMAHA  SYSTEM. 

Consolidated    .............................  6s  and  3^s,  1930 

Chicago,  St.  Paul  &  Minn.  Ry  ____  First    .............  6s,  1918 

North  Wisconsin  Ry  ............     "       .............  6s,  1930 

St.  Paul  &  Sioux  City  R.  R  ......     "      .............  6s,  1919 

Sault  Ste.  Marie  &  Southw  'n  Ry  .  .     "      .............  5s,  1915 

Superior  Short  Line  Ry  .........      "       .............  5s,  1930 


270  LIST   OP   INVESTMENTS. 

CHICAGO,  ROCK  ISLAND  &  PACIFIC  SYSTEM. 

Chicago,  Rock  Island  &  Pac  R.  R.  First  Mortgage 6s,  1917 

Chicago,  Rock  Island  &  Pac.  Ry . .  General 4s,  1988 

DELAWARE    &   HUDSON    SYSTEM. 

Adirondack  Ry First    4i/2s,  1942 

Albany  &  Susq.  R,  R.  (Guar.).. . Convertible    3y2s,  1946 

Delaware  &  Hudson  Canal  Co. — 

Pennsylvania  Division First    7s,  1917 

Delaware  &  Hudson  Co First  and  Ref 'g. . .  .4s,  1943 

Schenectady  &  Duanesburg  R.  R.  First    6s,  1924 

DELAWARE,    LACKAWANNA   &   WESTERN   SYSTEM. 

Bangor  &  Portland  Ry First    6s,  1930 

Morris  &  Essex  R.  R.  (Guar.) Refunding    ..... .3y2s,  2000 

Warren  R.  R.  (Guar.) "  3y2s,  2000 

GREAT  NORTHERN  SYSTEM. 

First  and  Refunding 4*143,  1961 

Eastern  R.  R.  of  Minn.,  No.  Div. .  First    4s,  1948 

Minneapolis  Union  Ry "       5s  and  6s,  1922 

Montana  Central  Ry "       5s  and  6s,  1937 

Spokane  Falls  &  North 'n  Ry "      6s,  1939 

St.  Paul,  Minn.  &  Manitoba  Ry. .  Cons'd  4s,  4^s,  and  6s,  1933 

Montana  Extension 4s,  1937 

Pacific  Extension 4s,  1940 

Wilmar  &  Sioux  Falls  Ry First    5s,  1938 

ILLINOIS  CENTRAL  SYSTEM. 

Collateral  Trust  3y2s,  1950 

Cairo  Bridge  4s,  1950 

Chic.,  St.  Louis  &  New  Orl's  R.  R.  Consolidated  .  .3y2s,  1951 

Memphis  Division 4s,  1951 

First  Mortgage,  Gold  3^s  and  4s,  1951 

First  Mortgage,  Gold  Extension 3i/2s,  1951 

First  Mortgage,  Sterling  Exten 3s  and  4s,  1951 


CONNECTICUT.  271 

First  Mortgage,  Sterling  Exten 31/28,  1950 

Kankakee  &  Southwestern  R.  R 5s,  1921 

Litchfield   Division    3s,  1951 

Louisville  Division S^os,  1953 

Purchased  Lines 3i/£s,  1952 

Refunding  Mortgage 4s,  1955 

St.  Louis  Division 3s  and  3^s,  1951 

Springfield  Division 31/9S,  1951 

Omaha  Division   3s,  1951 

"Western  Lines    4s,  1951 

LAKE   SHORE    &  MICHIGAN   SOUTHERN  RAILWAY. 

General  Mortgage 3y2s,  1997 

Kalamazoo  &  White  Pigeon  R.  R.First 5s,  1940 

LEHIGH  VALLEY  SYSTEM. 

Annuity  Perpetual  Consolidated 4i/£s  and  6s, 

Consolidated    4y2s  and  6s,  1923 

First  Mortgage  4s,  1948 

Easton  &  Amboy  (Guar.) First    5s,  1920 

LOUISVILLE  &  NASHVILLE  SYSTEM. 

First   Mortgage    First    5s,  1937 

General  Mortgage    6s,  1930 

Unified  Mortgage 4s,  1940 

Evansville,  Hen.  &  Nashv.  Div.  . .  First    6s,  1919 

Mobile  &  Montgomery  Ry "       4y2s,  1945 

Nashv.,  Flor.  &  Sheff.  Ry.  (Guar.).     "      5s,  1937 

New  Orleans  &  Mobile  Div "      6s,  1930 

Pensacola   Division    "       6s,  1920 

Pensacola  &  Atlantic  (Guar.) "       6s,  1921 

Paducah  &  Memphis  Division.  ...     "       4s,  1946 

Southeast  &  St.  Louis  Div "      6s,  1921 

Trust  "      5s,  1931 

Louisville,  Gin.  &  Lexington General   4^s,  1931 

Louis.  &  Nash.  T'l  Co.  (Guar.) .  .First 4s,  1952 

So.  &  No.  Alabama  R.  R.  (Guar.). Consolidated    5s,  1936 


272  LIST   OF   INVESTMENTS. 

MICHIGAN   CENTRAL   SYSTEM. 

Detroit  &  Bay  City First  5s,  1931 

First   Mortgage    "  3i/2s,  1952 

Joliet  &  No.  Indiana "  4s,  1957 

Jackson,  Lansing  &  Saginaw "  3^8,  1951 

Kalamazoo  &  South  Haven "  5s,  1939 

Michigan  Air  Line "  4s,  1940 

MINNEAPOLIS,   ST.  PAUL  &   SAULT  STE.  MARIE   SYSTEM 

First  Consolidated 4s,  1938 

Minn.   &  Pacific  Ry First    4s,  1936 

Minn.,  Sault  Ste.  Marie  &  At.  Ry.     "      4s,  1926 

MOBILE  &  OHIO   SYSTEM. 

First  Mortgage  6s,  1927 

NASHVILLE,  CHATTANOOGA  &   ST.  LOUIS  SYSTEM. 

Consolidated  Mortgage    5s,-  1928 

Centreville  Branch First  6s,  1923 

Fayette  &  McMinnville  Branch . .     "  6s,  1917 

Jasper  Branch  Extension "  6s,  1923 

Lebanon  Branch "  6s,  1917 

Memphis  Union  Sta.  Co.  (Guar.).     "  5s,  1959 

Tracy  City  Branch "  6s,  1917 

NEW  YORK  CENTRAL  SYSTEM. 

First  Mortgage  3y2s,  1997 

Refunding  and  Improvement 4i/£s,  2013 

Beech  Creek  R.  R.  (Guar.) First    4s,  1936 

Beech  Creek  Exten.  R.  R.  (Guar.).     "      3^s,  1951 

.Consolidated    4s,  1955 

Carthage,  Water.  &  Sack.  H.  R.  R.First    5s,  1931 

Carthage  &  Adirondack  Ry "      4s,  1981 

Gouverneur  &  Oswegatchie  R.  R.     "      5s,  1942 

Little  Falls  &  Dolgeville "      3s,  1932 

Mohawk  &  Malone  Ry "      4s,  1991 


CONNECTICUT.  273 

Mohawk  &  Malone  Ry Consolidated    3y2s,  2002 

New  York  &  Putnam  R.  B "  4s,  1993 

New  York  &  Northern  Ry First    5s,  1927 

New  Jersey  June.  R.  R.  (Guar.) .     "      4s,  1986 

Norwood  &  Montreal  R.  R "      5s,  1916 

Oswego  R.  R.  Bridge "      6s,  1915 

Oswego  &  Rome  R.  R "      7s,  1915 

Pine  Creek  Ry.  (Guar.) "      6s,  1932 

Rome,  Water.  &  Ogdens.  R.  R Cons'd  3y2s,  4s,  and  5s,  1922 

"      ....Terminal 5s,  1918 

Syracuse,  Phcenix  &  Oswego. . .  .First    6s,  1915 

Spuyten  D'vil  &  Pt.  Morris  R.  R.      "       3y2s,  1959 

AVest  Shore  R.  R.  (Guar.) "      4s,  2361 

Utica  &  Black  River  R.  R "      4s,  1922 

NORFOLK  &  WESTERN  SYSTEM. 

Consolidated  Mortgage 4s,  1996 

General  Mortgage    6s,  1931 

Columbus  Con.  &  Terminal  Co. . First    5s,  1922 

New  River  Division "      6s,  1932 

Improvement  and  Exten.  Mort 6s,  1934 

Scioto  Valley  &  New  Eng.  R.  R. . First .4s,  1989 

NORTHERN  PACIFIC   SYSTEM. 

General  Lien 3s,  2047 

Prior   Lien    ^ 4s,  1997 

St.  Paul  &  Northern  Pacific  Ry. . First    6s,  1923 

St.  Paul  &  Duluth  R.  R Consolidated    4s,  1968 

"     First    5s,  1931 

"     Second 5s,  1917 

Duluth  Short  Line First    '5s,  1916 

Wash.  &  Columbia  River  Ry "      4s,  1935 

PENNSYLVANIA  SYSTEM. 

Consolidated  Mortgage 5s,  1919 

4s,  1943 

4s,  1948 


274  LIST  OF  INVESTMENTS. 

Consolidated  Mortgage 3i^s,  1945 

Allegheny  Valley  Ry General 4s,  1942 

Belvidere  Delaware  R.  R.  (Guar.). Consolidated    4s,  1925 

4s,  1927 

....3y2s,  1943 

Cambria  &  Clearfield  Ry General 4s,  1955 

Clearfield  &  Jefferson  Ry First    6s,  1927 

Cleveland  &  Pittsburgh  (Guar.) . .  General 3i/2s,  1948 

"      ..       "        3y2s,  1950 

"       ..  3i/2s  and  4i/2s,  1942 

Connecting  Ry.  (Guar.)    4s,  1951 

Dela.  River  &  Bridge  Co.  (Guar.). First    4s,  1936 

Junction  R.   R General 31/^s,  1930 

New  York  Bay  R.  R.  (Guar.) First    4s,  1948 

Pennsylvania  &  Northw  'n  R.  R. .  .  General 5s,  1930 

Philadelphia  &  Erie  Ry "        4s,  5s,  and  6s,  1920 

Pittsburgh,  Va.  &  Charleston  Ry.  First    4s,  1943 

Phila.,  Bait.  &  Washington  R.  R. .     "      4s,  1943 

Phila.,  Wil.  &  Baltimore  R.  R 4s,  1917 

"  ....' 4s,  1922 

"  4s,  1926 

"  4s,  1932 

Pitts.,  Cin.,  Chic.  &  St.  Louis Consolidated    4i/2s,  1940 

"  "   ....     "      ....4i/2s,  1963 

"  "   ....     "      ...-41/2S,  1942 

"  "          "      4s,  1945 

"  "   ....     "      4s,  1953 

"  "   ....     "      4s,  1957 

"  "   ....     "      4s,  1960 

....3i/2s,  1949 

Chartier  Ry First    3y2s,  1931 

Chic.,  St.  Louis  &  Pittsburgh. .  Consolidated    5s,  1932 

Sunbury  &  Lewiston  Ry First    4s,  1936 

Sunbury,  Haz.  &  Wilkes-Barre  Ry.     "      5s,  1928 

Southwest  Pennsylvania  Ry "       7s,  1917 

United  New  Jer.  R.  R.  &  Canal  Co.General 4s,  1948 

4s,  1944 

"  "          "  "         "        "  ..4s,  1929 


CONNECTICUT.  275 

United  New  Jer.  R.  E.  &  Canal  Co. General    4s,  1923 

3i/2s,  1951 

West  Chester  R.  R First    5s,  1919 

Western  Pennsylvania  R.  R Consolidated    4s,  1928 

PITTSBURGH  &  LAKE  ERIE  SYSTEM. 

Pittsburgh  &  Lake  Erie  R.  R First    6s,  1928 

Pitts.,  McK.  &  Y.  Ry.  (Guar.) "      6s,  1932 

READING   SYSTEM. 

Philadelphia  &  Reading  R.  R 5s,  1933 

SOUTHERN  PACIFIC  SYSTEM. 

Northern  Ry First    5s,  1938 

Northern  California  Ry "      5s,  1929 

Southern  Pacific  Branch  Ry "      6s,  1937 

Southern  Pacific  R.  R Consolidated    ..... .5s,  1937 

"      Refunding... 4s,  1955 

UNION  PACIFIC  RAILROAD. 

First  Mortgage 4s,  1947 

Refunding  Mortgage    4s,  2008 

VANDALIA  RAILROAD. 

Consolidated  A 4s,  1955 

Consolidated  B  4s,  1957 

Terre  Haute  &  Indianapolis  R.  R.  Consolidated    5s,  1925 

Railroad  bonds  which  are  at  present  not  legal  under  the  gen- 
eral provisions  of  the  law,  but  which  are  legal  investments 
under  Section  36. 

ATCHISON,  TOPEKA  &  SANTA  FE  SYSTEM. 

California- Arizona  Lines First  and  Ref 'g.  .4^s,  1962 

Ashland  Coal  &  Iron  Ry First    4s,  1925 

Boston,  Revere,  B.  &  Lynn  R.  R. .     "      4y2s,  1927 

Bridgeton  &  Saco  River  R.  R "      4s,  1928 


276  LIST  OF   INVESTMENTS. 

BUFFALO.  ROCHESTER  &  PITTSBURGH  SYSTEM. 

Allegheny  &  Western  Ry First    4s,  1998 

Buffalo,  Roch.  &  Pittsburgh  Ry. .  General 5s,  1937 

"  ..Consolidated    4y2s,  1957 

Clearfield  &  Mahoning  Ry First    5s,  1943 

Lincoln  Park  &  Charlotte  R.  R..     "      5s,  1939 

Rochester  &  Pittsburgh  R.  R "      6s,  1921 

"     ....Consolidated    6s,  1922 

Cornwall  &  Lebanon  R,  R First    4s,  1921 

Coudersport  &  Pt.  Allegheny  R.  R.First    5s,  1916 

CENTRAL  RAILWAY  OF  NEW  JERSEY  SYSTEM. 

New  York  &  Long  Branch  R.  R. .  General 4s  and  5s,  1941 

Wilkes-Barre  &  Scranton  Ry First    4y2s,  1938 

CHICAGO   &   NORTHWESTERN   SYSTEM. 

Collateral  Trust 5s  and  6s,  1929 

CONNECTICUT  RAILWAY  &   LIGHTING  COMPANY 

First  Refunding  4^s,  1951 

Bridgeport  Traction  Co First    5s,  1923 

Conn.  Lighting  &  Power  Co ' '      5s,  1939 

Chicago  &  West.  Indiana  R.  R First    6s,  1932 

Cumberland  &  Pennsylvania  R.  R.First    5s,  1921 

DELAWARE  &  HUDSON  SYSTEM. 

Rensselaer  &  Saratoga  R.  R First    7s,  1921 

Ticonderoga  R.  R "      6s,  1921 

DELAWARE,   LACKAWANNA   &   WESTERN   SYSTEM. 

Morris  &  Essex  R.  R Consolidated    7s,  1915 

N.  Y.,  Lacka.  &  Western  Ry First    6s,  1921 

Detroit  &  Toledo  Shore  Line  R.  R.First    4s,  1953 

Elgin,  Joliet  &  Eastern  Ry First    5s,  1941 


CONNECTICUT.  277 

ERIE   RAILROAD   SYSTEM. 

Cleveland  &  Mahoning  Val.  Ry . .  First  5s,  1938 

Goshen  &  Deckertown  R.  R "  6s,  1928 

Montgomery  &  Erie  Ry "  5s,  1926 

New  Castle  &  Shenango  Val.  R.  R.     "  6s,  1917 

Northern  Ry.  of  New  Jersey "  6s,  1917 

Sharon  Ry "  4y2s,  1919 

Genesee  &  Wyoming  R.  R First  5s,  1929 

HOCKING  VALLEY  RAILWAY  COMPANY. 

First  Consolidated  4y2s,  1999 

Columbus  &  Hocking  Val.  R.  R.  .First  Ext 4s,  1948 

Columbus  &  Toledo  R.  R "       "       4s,  1955 

ILLINOIS   CENTRAL    SYSTEM. 

Chic.,  St.  Louis  &  New  Orleans. .  Consolidated    5s,  1951 

LOUISVILLE  &  NASHVILLE. 

Atlanta,  Knoxville  &  Gin.  Div. . .  First    4s,  1955 

LAKE  SHORE  &  MICHIGAN  SOUTHERN  SYSTEM. 

Kalamazoo,  Allegan  &  G.  R.  R.  R.First    5s,  1938 

Mahoning  Coal  R.  R "      5s,  1934 

McKeesport  &  Belle  Vernon  R.  R .     "      6s,  1918 

MINNEAPOLIS,    ST.    PAUL   &    SAULT    STE.    MARIE    SYSTEM. 

Central  Terminal  Ry First    4s,  1941 

Mobile  &  Ohio  R.  R First  Extension 6s,  1927 

Narragansett  Pier  R.  R First    4s,  1916 

NEW  YORK  CENTRAL  SYSTEM. 

New  York  &  Harlem  R.  R Refunding    3y2s,  2000 

NORTHERN  PACIFIC    SYSTEM. 

St.  Paul  &  Duluth  Division 4s,  1996 


278  LIST   OF  INVESTMENTS. 

PENNSYLVANIA  SYSTEM. 

Belvidere  Delaware  R.  R Consolidated    4s,  1933 

•  Camden  &  Burlington  Co.  R.  R.  .First    4s,  1927 

Delaware  R.  R General 4i/2s,  1932 

Elmira  &  Williamsport  R.  R First    4s,  1950 

Erie  &  Pittsburgh  R.  R General 3y2s,  1940 

Little  Miami  R.  R "        4s,  1962 

Massillon  &  Cleveland  R.  R First    5s,  1920 

N.  Y.,  Phila.  &  Norfolk  R.  R....     "      4s,  1939 

Ohio  Connecting  Ry "       4s,  1943 

Pitts.,  Youngstown  &  Ashta.  R.  R. Consolidated    5s,  1927 

"      General 4s,  1948 

Pitts.,  Wheeling  &  Kentucky  R.  R. Consolidated    6s,  1934 

Sham.  Valley  &  Pottsville  R.  R. . .  First    3y2s,  1931 

"West  Jersey  &  Sea  Shore  R.  R. 

Series  A,  B,  C,  D,  E,  and  F 3y2s  and  4s,  1936 

Raritan  River  R.  R First    5s,  1939 

BEADING  SYSTEM. 

Delaware  &  Bound  Brook  R.  R.  .Consolidated    . . .  .3^8,  1955 

East  Pennsylvania  R.  R First    4s,  1958 

North  Pennsylvania  R.  R "      4s,  1936 

Phila.,  Harrisburg  &  Pitts.  R.  R. .     "      5s,  1925 

Phila.  &  Reading  R.  R Improvement 4s,  1947 

"    Terminal 5s,  1941 

Reading  Belt  R.  R First    4s,  1950 

Sham.,  Sunbury  &  Lewiston  R.  R.     "      5s,  1912 

ST.  LOUIS,  IRON  MOUNTAIN  &   SOUTHERN  SYSTEM. 

River  &  Gulf  Div ! First    4s,  1933 

SOUTHERN   PACIFIC   SYSTEM. 

San  Francisco  Terminal 4s,  1950 

TERMINAL  RAILWAY  ASSOCIATION  OF   ST.  LOUIS. 

Consolidated  Mortgage 5s,  1944 

First  Mortgage 4y2s,  1939 


CONNECTICUT.  279 

General  Refunding  Mortgage 4s,  1953 

St.  Louis  Mer.  Bridge  Term.  Ry.  .First    5s,  1930 

St.  Louis  Merchants '  Bridge  Co . .     "      6s,  1929 

WESTERN  MARYLAND  SYSTEM. 

Bait.  &  Cumberland  Valley  Exten.First    6s,  1931 

Baltimore  &  Harrisburg  Ry "       5s,  1936 

Sixth.    Equipment  Trust  Obligations  as  follows : 

Savings  Banks  may  invest  not  exceeding  two  per  centum  of 
their  deposits  and  surplus  therein. 

BALTIMORE  &  OHIO  RAILROAD. 

Equipment  Trust  of  1912 4y2s,  serially  to  1922 

Equipment  Trust  of  1913 4y2s,  serially  to  1923 

CENTRAL   RAILROAD   OF   NEW  JERSEY. 

Series  D   4s,  serially  to  1915 

Series  E   4s,  serially  to  1916 

Series  F 4s,  serially  to  1917 

ILLINOIS  CENTRAL  RAILROAD. 

Series  A   41/^s,  semi-annually  to  1923 

Series  B   5s,  semi-annually  to  1923 

LEHIGH  VALLEY  RAILROAD. 
Series  J   4i/£s,  serially  to  1917 

LOUISVILLE   &   NASHVILLE   RAILROAD. 
Series  A   5s,  semi-annually  to  1923 

MINNEAPOLIS,  ST.  PAUL  &   SAULT  STE.  MARIE. 

Series  A  5s,  serially  to  1917 

Series  B  4i/2s,  serially  to  1920 

Series  C  4y2s,  serially  to  1921 

Series  D  .  4i/2s,  serially  to  1922 


280  LIST   OF   INVESTMENTS. 

NEW  YORK  CENTRAL  LINES. 

Joint  Equipment  Trust  .............  5s,  serially,  1907  to  1922 

"     ...........  4i/2s,  serially,  1910  to  1925 

"     .  ..........  4i/2s,  serially,  1912  to  1927 

"  ...........  4i/2s,  serially,  1913  to  1928 

B.  &  A.  Equipment  Trust  .........  4^s,  serially,  1913  to  1927 


NEW  YORK,  NEW  HAVEN  &  HARTFORD  RAILROAD. 

Equipment  Trust  of  1914  ....................  serially  to  1929 

Seventh.    Bonds  of  Street  Railways  in  Connecticut. 

Savings  Banks  may  invest  not  exceeding  two  per  centum  of 
their  deposits  and  surplus  therein. 

Bristol  &  Plainville  Tramway  Co  .  First    ...........  tyfa,  1945 

Eighth.    Bonds  of  Water  Companies  in  Connecticut. 

Savings  Banks  may  invest  not  exceeding  two  per  centum  of 
their  deposits  and  surplus  therein. 

Bridgeport  Hydraulic  Co  .........  First    .............  4s,  1925 

"    ........  Notes  .............  5s,  1916 

New  Haven  Water  Co  ..........  Debentures    .......  4s,  1915 

"  ..........         "  .....  4i/2s,  1962 

Ninth.    Bonds  of  Telephone  Companies  in  Connecticut. 

Savings  Banks  may  invest  not  exceeding  two  per  centum  of 
their  deposits  and  surplus  therein. 

So.  New  England  Telep.  Co  ......  First    .............  5s,  1948 

Tenth.    Bonds  of  Telephone  Companies  Outside  of  Connecticut. 

Savings  Banks  may  invest  not  exceeding  two  per  centum  of 
their  deposits  and  surplus  therein. 

American  Telep.  &  Teleg.  Co  ____  Collateral  Trust  ____  4s,  1929 


MASSACHUSETTS. 

PUBLIC  FUNDS. 
Public  funds  of  the  United  States  and  of  the  following  States : 

California  Nebraska 

Connecticut  New  Hampshire 

Delaware  New  Jersey 

District  of  Columbia  New  York 

Illinois  Ohio 

Indiana  Oregon 

Iowa  Pennsylvania 

Maine  Rhode  Island 

Massachusetts  Vermont 

Michigan  Washington 

Minnesota  Wisconsin 
Missouri 

Bonds  or  notes  of  the  following  counties,  cities,  towns  and 
districts  in  New  England: 

MAINE.  Ellsworth 

Gardiner 

Counties. 

Hallowell 
Androscoggm  T       .  . 

Lewiston 
Aroostook 

T,  Portland 

Kennebec 

Saco 

Cities.  -                          Westbrook 
Augusta 

Bangor  Towns. 

Belfast  Boothbay  Harbor 

Biddeford  Brunswick 

Brewer  Caribou 

Eastport  Dexter 

281 


282 


LIST   OF  INVESTMENTS. 


Fairfield 

Houlton 

Kennebunk 

Lisbon 

Lubec 

Old  Orchard 

Pittsfield 

Rumford 

Sanford 

Yarmouth 

Water  Districts. 

Augusta 
Brunswick  and 

Topsham 
Gardiner 
Kennebec 
Kittery  * 
Portland 
Van  Buren  * 

NEW  HAMPSHIRE. 

Counties. 

Belknap 
Hillsborough 
Merrimack 
Rockingham 

Cities. 
Berlin 
Concord 
Dover 
Franklin 
Keene 
Manchester 


Nashua 
Portsmouth 
Rochester 
Somersworth 

Towns. 

Ashland 

Claremont 

Derry 

Gorham 

Haverhill 

Jaft'rey 

Lancaster 

Milford 

Newmarket 

Northumberland 

Peterborough 

Plaistow 

Raymond 

Salem 

Sunapee 

AValpole 

Wilton 

Water  District. 
North  Conway  * 

VERMONT. 

Cities. 
Barre 
Burlington 
Montpelier 
Rutland 
St.  Albans 
Vergennes 


*Less   than   5,000   inhabitants   within   the    district,   therefore    only 
bonds  issued  prior  to  June  8,  1908,  are  legal. 


MASSACHUSETTS. 


283 


Towns. 

Bennington 

Brattleborough 

Ludlow 

MASSACHUSETTS. 

Bonds  or  notes  of 
any  county,  city, 
town  or  incor- 
porated districtt 
of  the  Common- 
wealth of  Massa- 
chusetts. 

RHODE  ISLAND. 
Cities. 

Central  Falls 
Cranston 
Newport 
Providence 
Woonsocket  $ 

Towns. 
Barrington 
Burrillville 
Bristol 
Coventry 
Cumberland 
East  Greenwich 
East  Providence  $ 
Jamestown 
Johnston  § 


Lincoln  $ 

North  Smithfield 

South  Kingstown 

Tiverton 

Warren 

Warwick 

Westerly 

CONNECTICUT. 

County. 
Fairfield 

Cities. 
Ansonia 
Bridgeport 
Bristol 
Danbury 
Derby 
Hartford 
Middletown 
New  Britain 
New  Haven 
New  London 
Putnam 
Rockville 
Stamford 
Waterbury 
Willimantic 

Towns. 
Branford 
Brooklyn 
Canton 


t  The  banking  department  has  been  unable  to  learn  of  any  incor- 
porated district  in  Massachusetts  the  net  indebtedness  of  which  is  in 
excess  of  the  limit  prescribed  by  law. 

t  Net  indebtedness,  as  defined  by  new  law,  in  excess  of  legal  limit, 
therefore  only  bonds  issued  prior  to  June  8,  1908,  are  legal. 

$  Only  those  which  have  been  assumed  by  the  city  of  Providence. 


284  LIST  OP  INVESTMENTS. 

East  Hartford  Norwich 

East  Lyme  Plainfield 

Ellington  Ridgeneld 

Enfield  Southington 

Essex  South  Windsor 

Fairneld  Stafford 

Glastonbury  Stamford 

Greenwich  Thomaston 

Hamden  Torrington 

Litchfield  Wallingford 

Madison  Watertown 

Manchester  West  Hartford 

Meriden  Windham 

Newtown  Windsor 

Norfolk  Windsor  Locks 

Legally  authorized  bonds  for  municipal  purposes,  etc.,  of  the 
following  cities  outside  of  New  England: 

Akron,  0.  Dubuque,  la. 

Albany,  N.  Y.  Duluth,  Minn. 

Allentown,  Pa.  Elmira,  N.  Y. 

Altoona,  Pa.  Erie,  Pa. 

Amsterdam,  N.  Y.  Evansville,  Ind. 

Auburn,  N.  Y.  Flint,  Mich. 

Baltimore,  Md.  Ft.   Wayne,  Ind. 

Bay  City,  Mich.  Gr 'd  Rapids,  Mich. 

Binghamton,  N.  Y.  Harrisburg,  Pa. 

Buffalo,  N.  Y.  Indianapolis,  Ind. 

Canton,  0.  Jackson,  Mich. 

Cedar  Rapids,  la.  Jamestown,  N.  Y. 

Chicago,  111.  Jersey  City,  N.  J. 

Cleveland,  0.  Johnstown,  Pa. 

Columbus,  0.  Joplin,  Mo. 

Davenport,  la.  Kalamazoo,  Mich. 

Dayton,  0.  Kansas  City,  Mo. 

Decatur,  111.  La  Crosse,  Wis. 

Des  Moines,  la.  Lancaster,  Pa. 

Detroit,  Mich.  Lansing,   Mich. 


MASSACHUSETTS. 


285 


Lima,  O. 

Los  Angeles,  Cal. 
Louisville,  Ky. 
Milwaukee,  Wis. 
Minneapolis,  Minn. 
Newark,  N.  J. 
New  Castle,  Pa. 
Niagara  Falls,  N.  Y. 
Oakland,  Cal. 
Omaha,  Neb. 
Oshkosh,  Wis. 
Paterson,  N.  J. 
Philadelphia,  Pa. 
Pittsburgh,  Pa. 
Portland,  Ore. 
Quincy,  111. 
Beading,  Pa. 
Rochester,  N.  Y. 
Rockford,  111. 
Saginaw,  Mich. 
St.  Joseph,  Mo. 


St.  Louis,  Mo. 
St.  Paul,  Minn. 
San  Francisco,  Cal. 
Scranton,  Pa. 
Seattle,  Wash. 
Sioux  City,  la. 
South  Bend,  Ind. 
Spokane,  Wash. 
Springfield,  Mo. 
Springfield,  0. 
Superior,  Wis. 
Syracuse,  N.  Y. 
Terre  Haute,  Ind. 
Toledo,  0. 
Troy,  N.  Y. 
Utica,  N.  Y. 
Wilkes-Barre,  Pa. 
Williamsport,  Pa. 
York,  Pa. 
Youngstown,  0. 
Zanesville,  O. 


RAILROAD    BONDS. 

Bangor  &  Aroostook  System,  f,  fl 

Bangor  &  Aroostook  E.  R.  f,  fl. . .  First 5s,  1943 

Bangor  &  Aroostook  R.  R.,  Pis- 

cataquis  Division  f ,  f[ "  5s,  1943 

Bangor  &  Aroostook  R.  R.,  Van 

Buren  Extension  f ,  ff  ' '  5s,  1943 

Bangor  &  Aroostook  R.  R.,  Med- 

ford  Extension  f,  fl "  5s,  1937 

Aroostook  Northern  R.  R.  f,  II "  . .  .< 5s,  1947 

Northern  Maine  Seaport  R.  R.  f,  fl.R.  R.  and  term,  first  5s,  1935 


t  Dividends  paid  for  insufficient  number  of  years,  but  legal  under 
clause  fourth. 

If  Amount  paid  in  dividends  less  than  one-third  of  amount  paid  in 
interest,  but  legal  under  clause  fourth. 


286  ,  LIST  OF  INVESTMENTS. 

Boston  &  Maine  System. 

Boston  &  Maine  R.  R Plain    3y2s,  1921 

"    "       3i/2s,  1923 

"    "       3y2s,  1925 

"  "         "    "       4s,  1926 

"    "       4i/2s,  1929 

"         "    "       4s,  1937 

"    "      4s,  1942 

"    "       4i/2s,  1944 

"    "      3s,  1950 

Ports.,  Gt.  Falls  &  Conway  R.  R. First    4i/2s,  1937 

Boston  &  Lowell  R.  R Plain   4s,  1915 

"      4s,  1916 

"      4s,  1917 

"       4s,  1918 

"       3y2s,  1919 

"       3i/2s,  1921 

"      3i/2s,  1923 

"      3i/2s,  1925 

"       4s,  1926 

"         "        "       4s,  1927 

"       4s,  1929 

"       4s,  1932 

"       4i/2s,  1933 

Conn.  &  Passumpsic  Rivers  R.  R . .  First    4s,  1943 

Concord  &  Montreal  R.  R Consolidated  mort..  .4s,  1920 

Connecticut  River  R.  R Plain    3y2s,  1921 

"     "       3i/2s,  1923 

"     "       4s,  1943 

Worcester,  Nashua  &  Roch.  R.  R. .  First    4s,  1930 

"    ..     "      4s,  1934 

"    ..     "      4s,  1935 

Fitchburg  R.  R Plain   4y2s,  1914 

"       "      4s,  1915 

" "      4s,  1916 

"       3i/2s,  1920 

"       4s,  1920 


MASSACHUSETTS.  287 

Fitchburg   R.    R Plain  3y2s,  1921 

"  4s,  1925 

"  4s,  1927 

"  4s,  1928 

"  4i/2s,  1923 

"  41/28,1932 

"  41/28,  1933 

"  4s,  1937 

Troy  &  Boston  R.  R First  7s,  1924 

Vermont  &  Massachusetts  R.  R. .  Plain  3i/2s,  1923 

Sullivan  County  R.  R First  4s,  1924 

Vermont  Valley  R.  R "  4i/2s,  1940 

Maine  Central  System. 

Maine  Central  R.  R Collateral  trust 5s,  1923 

Penobscot  Shore  Line  R.  R First    4s,  1920 

Maine  Shore  Line  R.  R "       6s,  1923 

Belfast  &  Moosehead  Lake  R.  R. . .     "       4s,  1920 

Dexter  &  Newport  R.  R "       4s,  1917 

Dexter  &  Piscataquis  R.  R "       4s,  1929 

European  &  North  American  Ry. .      "       4s,  1933 

Upper  Coos  R.  R Mortgage 4s,  1930 

"'        "    Extension  mort.  ..4i/2s,  1930 

Washington  County  Ry First    31/28,  1954 

Portland  &  Rumford  Falls  Ry. . .  Consolidated 4s,  1926 

Portland  &  Ogdensburg  R.  R First    4y2s,  1928 

Somerset  Ry "      5s,  1917 

"      First  refunding 4s,  1955 

New  York,  New  Haven  &  Hartford  System. 

N.  Y.,  N.  H.  &  Hartford  R.  R Debenture 4s,  1914 

"  "  "     "          4s,  1947 

"     ....          "         3i/2s,  1947 

"     ....          "         3y2s,  1954 

"     ....          "         4s,  1955 

"     . . . .  Convertible  deb.  .  .3y2s,  1956 


288  LIST  OF  INVESTMENTS. 

N.  Y.,  N.  H.  &  Hartford  R.  R., 

Harlem  River  &  Port  Chester.  First    .. ., 4s,  1954 

Housatonic  R.  R Consolidated 5s,  1937 

New  York,  Prov.  &  Boston  R.  R. .  General  4s,  1942 

Boston  &  New  York  Air  Line  R.  R.  First    4s,  1955 

Danbury  &  Norwalk  R.  R Consolidated   1*1  1920 

"     General  5s,  1925 

"     Refunding...- 4s,  1955 

Naugatuek  R.  R First    4s,  1954 

Debenture  3y2s,  1930 

New  Haven  &  Derby  R.  R Consolidated    5s,  1918 

Providence  &  Springfield  R.  R. . .  First 5s,  1922 

Providence  Terminal  Co ' '       4s,  1956 

Boston  &  Providence  R.  R Plain   4s,  1918 

Holyoke  &  Westfield  R.  R First    4^s,  1951 

(4s) 
New  England  R.  R Consolidated L  £  1945 

CDS3 
New  York  &  New  England  R.  R., 

Boston  Terminal  \\\\   First    4s,  1939 

Norwich  &  Worcester  R.  R Debenture 4s,  1927 

Old  Colony  R.  R Plain   4s,  1924 

"     "      4s,  1925 

"     "       4s,  1938 

"     "      3i/2s,  1932 

Providence  &  Worcester  R.  R First    4s,  1947 

Atchison.  Topeka  &  Santa  Fe  Railway  System. 

Atchison,  Topeka  &  Santa  Fe  Ry. General  mortgage  ..4s,  1995 
Atchison,  Topeka  &  Santa  Fe  Ry. 

Trans.  Short  Line First  4s,  1958 

Atchison,  Topeka  &  Santa  Fe  Ry. 

East  Oklahoma  "  4s,  1928 

Chicago  &  St.  Louis  Ry "  6s,  1915 

Chicago,  Santa  Fe  &  Cal.  Ry "  5s,  1937 

Hutchinson  &  Southern  Ry "  5s,  1928 

San.  Fran.  &  San  Joaquin  Val.  Ry.  ' '  5s,  1940 

||  ||  Legalized  by  special  act  of  General  Court. 


MASSACHUSETTS.  289 


Baltimore  &  Ohio  System. 

Baltimore  &  Ohio  R.  R  ..........  Extension   .........  4s,  1935 

"         "     ..........  Prior  lien  .......  3y2s,  1925 

"     ..........  First  mortgage   ____  4s,  1948 

"  ..........  Southwest.  Div.  ..3i/2s,  1925 

Ohio  Eiver  R.  R  ...............  First    .............  5s,  1936 

West  Virginia  &  Pittsburgh  R.  R  .     "       ...........  \^l  1990 


Central  of  New  Jersey  System. 
Central  R.  R.  of  New  Jersey  ____  General   ...........  5s,  1987 

Chicago  &  Northwestern  System. 
Chic.  &  Northwestern  Ry  .........  General    .......  i!^!  198? 

"  S'k'g.  fd.Consolidated  .......  7s,  1915 

"     ........  Extension   .........  4s,  1926 

f  fya") 

"     ........  S'k'g.  fd.  mort...  J<-  1929 


Cedar  Rapids  &  Mo.  River  R.  R.  .Mortgage   ..........  7s,  1916 

Northwestern  Union  Ry  .........  First    .............  7s,  1917 

Mil.,  Lake  Shore  &  Western  Ry  .  Consolidated    ......  6s,  1921 

Mil.,  Lake  Shore  &  Western  Ry., 

Marshfield  Extension  .......  First    .............  5s,  1922 

Mil.,  Lake  Shore  &  Western  Ry., 

Michigan  Division   .........     "       .............  6s,  1924 

Mil.,  Lake  Shore  &  Western  Ry., 

Ashland  Division   ..........     "       .............  6s,  1925 

Mil.,  Lake  Shore  &  Western  Ry., 

Ext.  and  imp  ...............  Mortgage   ..........  5s,  »  1929 

Wisconsin  Northern  Ry  .........  First    .............  4s,  1931 

Winona  &  St.  Peter  R.  R  ........     "       .............  7s,  1916 

Boyer  Valley  Ry*  ..............     "       ...........  3i/2s,  1923 

Minnesota  &  Iowa  Ry  ...........     "      ...........  3y2s,  1924 

Southern  Iowa  Ry*  .............  '  '  ...........  3^8,  1925 


*  Secured  on  less  than  100  miles  of  railroad,  but  legal. 


290  LIST   OF   INVESTMENTS. 

Princeton  &  Northwestern  Ry  ____  First  ...........  3y2s,  1926 

Peoria  &  Northhwestern  Ey.*  ____     "  ...........  3y2s,  1926 

Mankato  &  New  Vim  Ey*  ......     "  ...........  3y2s,  1929 

Fremont,  Elkhorn  &  Mo.  Val.  R.  R.  Consolidated    ......  6s,  1933 

Minnesota  &  S.  Dakota  Ey.*  .....  First  ...........  S^s,  1935 

Iowa,  Minn.  &  Northwestern  Ry  .  .      "  ...........  3y2s,  1935 

Sioux  City  &  Pacific  R.  R  .......     "  ...........  3y2s,  1936 

Man.,  Green  Bay  &  N.  W.  Ry  ____      "  ...........  3y2s,  1941 

Chicago,  Burlington  &  Quincy  System. 
Chic.,  B.  &  Q.  R.  R  ..............  General   ...........  4s,  1958 


"       "       "      "     Illinois  Div...  Mortgage  ......  1949 

I     } 

"       "       "      "     Iowa         "    ,  "  ..\^l  1919 

/5sj 

"      "     Denver  Ext  .......  .  ..............  4s,  1922 

"       "       "      "    Nebraska"    ..Mortgage   ..........  4s,  1927 

Bur.  &  M.  River  R.  R.  in  Nebraska.  Consolidated    ......  6s,  1918 

Republican  Valley  R.  R  .........  Mortgage  ..........  6s,  1919 

Tarkio  Valley  R.  R  ..............  First    .............  7s,  1920 

Nodaway  Valley  R.  R  ...........     "      .............  7s,  1920 

Chicago,  Milwaukee  &  St.  Paul  System. 


Chic.,  Milwaukee  &  St.  Paul  Ry.,  General  ........    4s     1  1989 


Chic.,  Milwaukee  &  St.  Paul  Ry., 

La  Crosse  &  Davenport  Div.  .  First    .............  5s,  1919 

Chic.,  Milwaukee  &  Stf  Paul  Ry., 

Dubuque   Division    .........  "       .............  6s,  1920 

Chic.,  Milwaukee  &  St.  Paul  Ry., 

Wisconsin  Valley  Division  ...  '  '     ..............  6s,  1920 

Chic.,  Milwaukee  &  St.  Paul  Ry., 

Chicago  &  Pac.  Western  Div  .  .  "       .............  5s,  1921 


*  Secured  on  less  than  100  miles  of  railroad,  but  legal. 


MASSACHUSETTS.  291 

Chic.,  Milwaukee  &  St.  Paul  Ry., 

Wisconsin  &  Minnesota  Div.  .First  5s,  1921 

Chic.,  Milwaukee  &  St.  Paul  Ry., 

Chicago  &  Lake  Superior  Div.  "  5s,  1921 

Chic.,  Milwaukee  &  St.  Paul  Ry., 

Chic.  &  Missouri  River  Div.  .  "  5s,  1926 

Chic.,  Milwaukee  &  St.  Paul  Ry., 

Gen.  &  Ref.  (not  in  report  but 

probably  legal)  4y2s,  2014 

Dakota  &  Great  Southern  Ry "  5s,  1916 

Fargo  &  Southern  Ry "  6s,  1924 

Milwaukee  &  Northern  R.  R Extension  4y2s,  1934 

Chicago,  Rock  Island  &  Pacific  System. 

Chic.,  Rock  Island  &  Pac.  R.  R. .  Mortgage    6s,  1917 

"     Ry General   4s,  1988 

Chicago,  St.  Paul,  Minneapolis  &  Omaha  System. 

Chic.,  St.  P.,  Minn.  &  Omaha  Ry. .  Consolidated  .    .  L(  1930 

I6s     ) 
Chic.,  St.  Paul  &  Minneapolis  Ry . .  First    6s,  1918 

North  Wisconsin  Ry "       6s,  1930 

St.  Paul  &  Sioux  City  R.  R "       6s,  1919 

Delaware  &  Hudson  System. 

Delaware  &  Hudson  Co First  refunding  ...  .4s,  1943 

Canal  Co.  ...  First    7s,  1917 

Adirondack  Ry "       4y2s,  1942 

Schenectady  &  Duanesburg  R.  R .  .      "       6s,  1924 

Albany  &  Susquehanna  R.  R Convertible 3i/£s,  1946 

Delaware,  Lackawanna  &  Western  System. 
New  York,  Lack.  &  W.  %.§ First    6s,  1921 


Xot  guaranteed  by  endorsement,  but  legal. 


292  |  LIST  OF   INVESTMENTS. 

Great  Northern  System. 

Great  Northern  Ry First  refunding  .  .4^s,  1961 

!5s) 
U922 

[4s  "I 
St.  Paul,  Minn.  &  Manitoba  Ey.  Consolidated   . .  J4%s  11933 

[6s    J 
St.  Paul,  Minn.  &  Manitoba  Ry., 

Montana  extension  4s,  1937 

St.  Paul,  Minn.  &  Manitoba  Ey., 

Pacific   extension    4s,  1940 

Eastern  Ry.  of  Minnesota,  North- 
ern Division 4s,  1948 

Montana  Central  Ry First  Jcsf  1937 


Wilmar  &  Sioux  Falls  Ry  .......  .............  5s,  1938 

Spokane  Falls  &  Northern  Ry  ____     "      .............  6s,  1939 

Illinois  Central  System. 

111.  Cent.  R.  R  ..................  Refunding  mortgagees,  1955 

"      "         "     Sterling  Extended  ....................  4s,  1951 

"      "         "     Gold  Extended  .....................  3i/2s,  1950 

"      "         "     Sterling  ............................  3s,  1951 

"      "         "     Gold  ...............................  4s,  1951 

"      "         "        "      .............................  3i/2s,  1951 

"      "         "     Gold  Extended    ...................  3y2s,  1951 

"      "         "     Springfield  Div.  .  .  First    ...........  3y2s,  1951 

11      "         "     Kan.  &  S.  W.  R.  R.     "       .............  5s,  1921 

"      "         "     Cairo  Bridge   ....     "      .............  4s,  1950 

St.  Louis  Division.     "  ,  .  J?.   I  1951 


Purchased  Lines  .  .     "      ...........  3y2s,  1952 

Collateral  Trust  ..     "      ...........  3y2s,  1950 

Western  Lines  f  .  .     "      .............  4s,  1951 


t  Bonds  do  not  cover  75  per  cent,  of  the  railroad  owned  in  fee  at 
the  date  of  the  mortgage  by  the  railroad  corporation  on  the  railroad 
of  which  the  mortgage  is  a  lien,  but  are  legal. 


MASSACHUSETTS.  293 

111.  Cent.  R.  B.  Louisville  Dlv.\  .  .First    3i/2s,  1953 

"      "         "     Omaha  Div  4   . . . .     "       3s,  1951 

"      "         "     Litchfield  Div*  ...     "       3s,  1951 

"      "         "     Collateral  Trust  \\ 4s,  1952 

Lake  Shore  &  Michigan  Southern  System. 

Lake  Shore  &  Mich.  Southern  Ry.  First  general 3~y2s,  1997 

EaL,  Allegan.  &  Gr.  Rapids  R.  E.*First    5s,  1938 

Motioning  Coal  R.  R* "       5s,  1934 

Pitts.,  McKeesport  &  Y.  R.  R* . .     "       6s,  1932 

Louisville  &  Nashville  System. 

Louisville  &  Nashville  R.  R Unified 4s,  1940 

"     General   6s,  1930 

"     First    5s,  1937 

"     Trust 5s,  1931 

Evans.,  Henderson  &  Nash.  Div. .  Sinking  fund 6s,  1919 

Louis.,  Gin.  &  Lexington  Ry General   4^s,  1931 

Southeast  &  St.  Louis  Division 6s,  1921 

Mobile  &  Montgomery 41/28,  1945 

New  Orl.  &  Mobile  Div.,  $5,000,000.  First    6s,  1930 

Nash.,  Florence  &  Sheffield  Ry . . . .     "      5s,  1937 

Pensacola  &  Atlantic  R.  R "      6s,  1921 

Michigan  Central  System. 

Michigan  Central  R.  R First  3i/2s,  1952 

Mich.  Cent.-Mich.  Air  Line  R.  R . .      "  4s,  1940 

Mich.  Cent.-Det.  &  Bay  City  R.  R.     "  5s,  1931 

Mich.-Cent.-Jackson,     Lansing     & 

Saginaw  R.  R "  3%s,  1951 


4.  Bonds  do  not  cover  75  per  cent,  of  the  railroad  owned  in  fee  at 
the  date  of  the  mortgage  by  the  railroad  corporation  on  the  railroad 
of  which  the  mortgage  is  a  lien,  but  are  legal. 

*  Secured  on  less  than   100  miles  of  railroad,  but  legal. 

||  Railroad  covered  by  one  of  the  issues  pledged  as  collateral  is  not 
operated  by  Illinois  Central  E.  E. 


294  LIST   OF   INVESTMENTS. 

Mich.  Cent.-Joliet  &  Northern  In- 

diana R.  R*  ...............  First  .............  4s,  1957 

Mich.-Cent.-Kalamazoo     &     South 

Haven  R.  R*  ..............     "  .............  5s,  1939 

Nashville,  Chattanooga  &  St.  Louis  System. 

Nashville,  Chat.  &  St.  Louis  Ry.  First  consolidated  ..5s,  1928 
Nashville,  Chat.  &  St.  Louis  Ry., 

Tracy  City  Branch  .........  First    .............  6s,  1917 

Nashville,  Chat.  &  St.  Louis  Ry., 

Fayette  &  McMinnville  Branch.     "       .............  6s,  1917 

Nashville,  Chat.  &  St.  Louis  Ry., 

Lebanon  Branch  ...........     "       .............  6s,  1917 

Nashville,  Chat.  &  St.  Louis  Ry., 

Jasper  Branch  Extension.  ...      "       .........  ...  .6s,  1923 

Nashville,  Chat.  &  St.  Louis  Ry., 

Centreville  Branch  .........     "       .............  6s,  1923 

New  York  Central  System. 

N.  Y.  Cent.  &  Hudson  River  R.  R.Mortgage  ........  3y2s,  1997 

Beech  Creek  R.  R  ..............  First    .............  4s,  1936 

Mohawk  &  Malone  Ry  ...........     "       .............  4s,  1991 

New  York  &  Harlem  R.  R.§  ____  Mortgage  ........  3y2s,  2000 

Rome,  Watertown  &  Ogdensburg  f5s 

R.  R.§   ....................  Consolidated  ...J  4s        1922 


Rome,  Watertown  &  Ogdensburg 

Terminal  R.  R.§  ...........  First  .............  5s,  1918 

Norwood  &  Montreal  R.  E.§  .....     "  .............  5s,  1916 

Oswego  R.  R.  Bridge  §  ..........     "  .............  6s,  1915 

Syracuse,  Phoznix  &  Oswego  R.  R.§  "  .............  6s,  1915 

(Jarthage,  Watertown  &  Socket's 

Harbor  R.  R.§  .............  Consolidated    ......  5s,  1931 

Utica  &  Black  River  R.  E.§  ......  First  .............  4s,  1922 


Secured  on  less  than  100  miles  of  railroad,  but  legal. 
Not  guaranteed  by  endorsement,  but  legal. 


MASSACHUSETTS.  295 

Boston  &  Albany  R.  R  ...........  Plain  ...........  3y2s,  1952 

"  ..........  "  ...........  3i/2s,  1951 

"  ..........  "  ..............  4s,  1933 

"  ..........  "  .............  4s,  1934 

"  ..........  "  .............  4s,  1935 

"  ..........  "  ...........  4i/2s,  1937 

"  ..........  "  .............  5s,  1938 

"  ..........  "  .............  5s,  1963 

Northern  Pacific  System. 

Northern  Pacific  Ry  ............  Prior  lien  .........  4s,  1997 

St.  Paul  &  Northern  Pac.  Ry  ........................  6s,  1923 

St.  Paul  &  Duluth  R.  R  .........  First    .............  5s,  1931 

Washington  &  Columbia  River  Ry.     "       .............  4s,  1935 

Pennsylvania  System. 

Pennsylvania  R.  R  ..............  Consolidated    ......  5s,  1919 

"  ..............  ......  4s,  1943 

"  ............  '.  .  -          ....3i/2s,  1945 

"  ..............     "      ......  4s,  .1948 

Sunbury  &  Lewiston  Ry.*  .......  First    .............  4s,  1936 

Sunbury,  Hazleton  &  Wilkesbarre 

Ry*  ......................      "       .............  5s,  1928 

West  Chester  R.  R*  ............     "       .............  5s,  1919 

Western  Pennsylvania  R.  R  ......  Consolidated    ......  4s,  1928 

Pitts.,  Va.  &  Charleston  Ry*  ____  First    .............  4s,  1943 

South  West  Pennsylvania  R.  R  .  .  .     "       .............  7s,  1917 

Junction  R.  R*  ................  General   .........  3i/>s,  1930 

re'si 

Philadelphia  &  Erie  R.  R  ........       "         .........  J  5s  L  1920 

N 
United  N.  J.  R.  R.  &  Canal  Co.  General  ...........  4s,  1923 

...........  4s,  1929 

...........  4s,  1944 

........  ...4s,  1948 


Secured  on  less  than  100  miles  of  railroad,  but  legal. 


296  LIST   OF    INVESTMENTS. 

United  N.  J.  R.  R.  &  Canal  Co..  .General    3y2s,  1951 

Delaware  Riv.  R.  R.  &  Bridge  Co.* First    4s,  1936 

Erie  &  Pittsburgh  R.  R* General   3y2s,  1940 

Cleveland  &  Pittsburgh  R.  R.  . .  .        "         \tYfl  ^±2 

(6/2s} 

"     ....       "         3i/2s,  1948 

"     "         3y2s,  1950 

Allegheny   Valley   Ry General    4s,  1942 

Cambria  &  Clearfield  R,  R First    5s,  1941 

Miscellaneous. 

Boston  Terminal  Co.\\\\ First    3^8,  1947 

Boston,  Rev.  Beach  &  Lynn  R.  R.\     "       4y2s,  1927 

Bridgton  &  Saco  River  R.  R Consolidated  4s,  1928 

New  London  Northern  R.  R First .4s,  1940 

Narragansett  Pier  R.  #.t "       4s,  1916 

Portland  Terminal  Co First    4s,  1961 


STREET  RAILWAY  BONDS. 

Bay  State  Street  Railway  Company. 

Boston,  Milton  &  Brockton  Street 

Ry.  Co First  mortgage  ....  5s,  1919 

Boston  &  Northern  Street  Ry.  Co.  Refund 'g  first  mort.  4s,  1954 

Braintree  Street  Ry.  Co First  mortgage  ....  6s.  1914 

Braintree  &  Weymouth  St.  Ry.  Co.  "  ...  .5s,  1917 

Bridgewater,  Whitman  &  Rockland 

Street  Ry.  Co "  "  ....5s,  1917 

Brockton,  Bridgewater  &  Taunton 

Street  Ry.  Co "  "  ....5s,  1917 

Brockton  Street  Ry.  Co "  " 5s,  1924 

Brockton  &  East  Bridgewater 

Street  Ry.  Co "  "          ....5s,  1918 


*  Secured  on  less  than  100  miles  of  railroad,  but  legal, 
t Dividends  paid  for  insufficient  number  of  years,  but  legal. 
||  ||  Legalized  by  special  act  of  General  Court. 


MASSACHUSETTS.  297 

Dighton,     Somerset     &     Swansea 

Street  Ry.  Co First  mortgage  ....  5s,  1915 

Georgetown,  Rowley  &  Ipswich 

Street  Ry.  Co "  "  ...  .5s,  1920 

Gloucester,  Essex  &  Beverly  Street 

Ry.  Co "  ....5s,  1916 

Haverhill,  Georgetown  &  Danvers 

Street  Ry.  Co "  5s,  1919 

Lowell,  Lawrence  &  Haverhill 

Street  Ry.  Co "  5s,  1923 

Lynn  &  Boston  Railroad  Co "  ...  .5s,  1924 

Mystic  Valley  Street  Ry.  Co "  "  ....  5s,  1919 

New  Bedford,  Middleboro  &  Brock- 
ton Street  Ry.  Co "  5s,  1920 

Norfolk  Central  Street  Ry.  Co.  . .  .  "  ...  .5s,  1918 

Norfolk  Suburban  Street  Ry.  Co.  .  "  ...  .5s,  1914 

Old  Colony  Street  Ry.  Co Refund 'g  first  mort.  4s,  1954 

People's  Street  Ry.  Co First  mortgage  5s,  1928 

Providence  &  Taunton  St.  Ry.  Co.  "  ...  .5s,  1918 

Rockland  &  Abington  St.  Ry.  Co. .  "  6s,  1915 

South  Shore  &  Boston  St.  Ry.  Co.  "  5s,  1919 

Taunton  Street  Ry.  Co Debenture 5s,  1914 

Taunton  &  Brockton  St.  Ry.  Co.  .  First  mortgage  ...  .5s,  1917 

Wakefield  &  Stoneham  St.  Ry.  Co.  "  "  ...  .5s,  1915 

West  Roxbury  &  Roslindale  St. 

Ry.  Co "  "  ....5s,  1916 


Boston  &  Revere  Electric  Street  Railway  Company. 

Boston   &   Revere   Electric   Street 

Ry.    Co Refund 'g  first  mort.  5s,  1928 


East  Middlesex  Street  Railway  Company. 

East  Middlesex  Street  Ry.  Co Plain    5s,  1918 

"     "  '.'       4s,  1922 


298  LIST   OP  INVESTMENTS. 

Fitchburg  &  Leominster  Street  Railway  Company. 

Fitchburg  &  Leominster  St.  Ry.  Co.  First  mortgage 5s,  1917 

"     "     "    Consol.  mort 4i/2s,  1921 

Leominster,  Shirley  &  Ayer  Street 

Ry.  Co First  mortgage   .  .  '.  .  5s,  1921 


Holyoke  Street  Railway  Gompany. 

Holyoke  Street  Ry.  Co  ...........  Debenture  .........  5s,  1915 

"         .........  5s,  1920 

"          .........  5s,  1923 


"     " 

"     " 


Nahant  &  Lynn  Street  Railway  Company. 

Nahant  &  Lynn  Street  Ry.  Co First  mortgage   ...  .5s,  1925 

"    "   "  "         5s,  1929 


Springfield  Street  Railway  Company. 

Springfield  Street  Ry.  Co First  mortgage   ....  4s,  1923 

Springfield  &  Eastern  St.  Ry.  Co.     "  5s,  1922 

Western  Massachusetts  St.  Ry.  Co.     "  "          5s,  1926 

Woronoco  Street  Ry.  Co "  "         5s,  1920 


West  End  Street  Railway  Company. 


"     " 
"     " 


West  End  Street  Ry.  Co  ........  Debenture  .......  4^s,  1914 

"  .........  4s,  1915 

"  .........  4s,  1916 

"  .........  4s,  1917 

"  .......  4i/2s,  1923 

"  .......  4i/2s,  1930 

"  .........  4s,  1932 

"  .........  5s,  1932 


MASSACHUSETTS.  299 

Worcester  Consolidated  Street  Railway  Company. 

Maryborough   &   Westborough   St. 

Ry.  Co Gold  mortgage 5s,  1921 

Uxbridge  &  Blackstone  St.  Ry.  Co. First  mortgage  ...  .5s,  1923 

"  "  "  Debenture 5s,  1927 

Worcester  Consolidated  St.  Ry.  Co.  "  4i/2s,  1920 

"  "  "  "  5s,  1927 

"  "  "  Ref'd'g  first  mort.  4i/2s,  1930 
"Worcester  &  Blackstone  Valley 

Street  Ry.  Co First  mortgage  .  .4y2s,  1926 

Worcester  &  Clinton  Street  Ry.  Co.  "  5s,  1919 

Worcester  &  Holden "  "  5s,  1923 

Worcester  &  Marlboroughh  Street 

Ry.  Co "  ...,5s,  1917 

Worcester  &  Southbridge  Street 

Ry.  Co "  .  .41/os,  1922 

Worcester  &  Southbridge  Street 

Ry.  Co "  "         .  .41/28,  1925 

TELEPHONE   COMPANY  BONDS. 

American  Telephone  &  Telegraph 

Co Collateral  trust 4s,  1929 


NEW  YORK. 


GOVERNMENT  BONDS. 

United  States 2%  Bonds     Panama    2%  Bonds 

United  States 3%  Bonds     Panama   3%  Bonds 

United  States 4%  Bonds     Dis.  of  Columbia.3.65%  Bonds 


STATE   BONDS. 

Arizona 

California 

Connecticut 

Delaware 

Florida 

Idaho 

Indiana 

Kansas 

Kentucky 

Louisiana 

Maine 

Maryland 

Massachusetts 

Minnesota 

Missouri 

Montana 


Nevada 

New  Hampshire 

New  Mexico 

New  York 

North  Dakota 

Oklahoma 

Pennsylvania 

Rhode  Island 

South  Dakota 

Tennessee 

Texas 

Utah 

Vermont 

Washington 

Wisconsin 

Wyoming. 


NEW  YORK  MUNICIPAL  BONDS. 

All  bonds  legally  issued  by  any  City,  County,  Town,  Village, 
School  District,  Poor  District  or  Union  Free  School  District,  in 
New  York  State. 

CITY  BONDS. 


Akron,  Ohio 
Allegheny,  Pa. 


Allentown,  Pa. 
Altoona,  Pa. 
300 


NEW    YORK. 


301 


Atlantic  City,  N.  J. 
Baltimore,  Md. 
Bay  City,  Mich. 
Bayonne,  N.  J. 
Boston,  Mass. 
Bridgeport,  Conn. 
Brockton,  Mass. 
Cambridge,  Mass. 
Camden,  N.  J. 
Canton,  Ohio 
Chicago,  111. 
Cincinnati,  Ohio 
Cleveland,  Ohio 
Columbus,  Ohio 
Dallas,  Texas 
Dayton,  Ohio 
Detroit,  Mich. 
Erie,  Pa. 
Fall  River,  Mass. 
Fort  "Wayne,  Ind. 
Grand  Rapids,  Mich. 
Harrisburg,  Pa. 
Hartford,  Conn. 
Hoboken,  N.  J. 
Holyoke,  Mass. 
Indianapolis,  Ind. 
Jacksonville,  Fla. 
Jersey  City,  N.  J. 
Kansas  City,  Kan. 
Kansas  City,  Mo. 
Lancaster,  Pa. 
Lawrence,  Mass. 
Los  Angeles,  Cal. 
Louisville,  Ky. 
Lowell,  Mass. 
Lynn,  Mass. 
Manchester,  N.  H. 


Milwaukee,  Wis. 
Minneapolis,  Minn. 
Newark,  N.  J. 
New  Bedford,  Mass. 
New  Haven,  Conn. 
Oakland,  Cal. 
Passaic,  N.  J. 
Paterson,  N.  J. 
Pawtucket,  R.  I. 
Peoria,  111. 
Philadelphia,  Pa. 
Pittsburgh,  Pa. 
Portland,  Me. 
Providence,  R.  I. 
Reading,  Pa. 
Rockford,  111. 
Saginaw,  Mich. 
San  Antonio,  Texas 
San  Francisco,  Cal. 
Scranton,  Pa. 
Somerville,  Mass. 
South  Bend,  Ind. 
Springfield,  111. 
Springfield,  Mass. 
Springfield,  Ohio 
St.  Louis,  Mo. 
St.  Paul,  Minn.' 
Tacoma,  Wash. 
Terre  Haute,  Ind. 
Toledo,  Ohio 
Trenton,  N.  J. 
"Waterbury,  Conn. 
Wilkes-Barre,  Pa. 
Wilmington,  Del. 
Worcester,  Mass. 
Wichita,  Kans. 
Youngstown,  Ohio 


302  LIST   OF   INVESTMENTS. 

RAILROAD   BONDS. 

Adirondack  Ry.,   1st 41/os,  1942 

Albany  &  Susque.,  1st  Mtge.  Conv 3y2s,  1946 

Allegheny  Vy.  R.  R.   Gen 4s,  1942 

Atch.,  Top.  &  Santa  Fe  Gen 4s,  1995 

Baltimore  &  Ohio  R.  R.  Co.  Extend 4s,  1935 

Bay  City  &  Battle  Creek  R.  R.  1st 3s,  1989 

Belvidere  Delaware  Cons.  Mtge 4s,  1925 

Belvidere  Delaware  Cons.  Mtge 4s,  1927 

Belvidere  Delaware  Cons.  Mtge 3y>s,  1943 

Boyer  Valley  R.  R.  1st 3y2s,  1923 

Buffalo  Creek  R.  R.  Co.  Cons.  Mtge 5s,  1941 

Buffalo,  Roch.  &  Pitts.  Ry.  Gen.  Mtge 5s,  1937 

Buffalo,  Roch.  &  Pitts.  Ry.  Cons.  Mtge 4y2s,  1957 

Burlington  &  Mo.  River  Cons.  Mtge 6s,  1918 

Cairo  R.  R.  Co.  1st  Mtge 6s,  1925 

Carth.,  Water.,  &  Sack  Harb.  Cons 5s,  1931 

Cedar  Rapids  &  Mo.  R.  1st  Mtge 7s,  1916 

Central  Pacific  Ry.  1st  Ref 4s,  1949 

Central  R.  R.  of  New  Jersey 5s,  1987 

Chartiers  Ry.  1st  Mtge 3y2s,  1931 

Chic.  &  Lake  Sup.  1st  Mtge 5s,  1921 

Chic.  &  Mo.  River  1st  Mtge 5s,  1926 

Chic.  &  N.  W.  Cons.  Mtge 7s^  1915 

Chic.  &  N.  W.  .Genl.  Mtge 3i/2s,  1987 

Chic.  &  N.  W.  Genl.  Mtge 4s,  1987 

Chic.  &'Pac.  Western  1st ; .  .5s,  1921 

Chic.,  Burlington  &  Quincy,  Genl.  Mtge 4s,  1958 

Chic.,  Burlington  &  Quincy,  Den.  Ext 4s,  1922 

Chic.,  Burlington  &  Quincy,  111.  Div 3i/2s,  1949 

Chic.,  Burlington  &  Quiney,  111.  Div 4s,  1949 

Chic.,  Burlington  &  Quincy,  Iowa  Div 4s,  1919 

Chic.,  Burlington  &  Quincy,  Iowa  Div 5s,  1919 

Chic.,  Burlington  &  Quincy,  Neb.  Ext 4s,  1927 

Chic.,  Mil.  &  St.  P.  Genl.  (due  May) 3y2s,  1989 

Chic.,  Mil.  &  St.  P.  Genl.  (due  May) 4s,  1989 

Chic.,  Mil.  &  St.  P.  Genl.  (due  May) 4y2s,  1989 


NEW     YORK.  303 

Chic.,  Mil.  &  St.  P.  Gen.  &  Ref 4y2s,  2014 

Chic.,  Mil.  &  St.  P.  Deb 4s,  1934 

Chic.,  Mil.  &  St.  P.  Conv 4y2s,  1932 

Chic.,  Mil.  &  St.  P.  European  Loan .4s,  1925 

Chic.,  Mil.  &  St.  P.,  Dubuque  Div.  1st 6s,  1920 

Chic.,  Rock  Island  &  Pac.  1st  Mtge 6s,  1917 

Chic.,  Rock  Island  &  Pac.  Genl.  Mtge 4s,  1988 

Chic.,  Rock  Island  &  Pac.  1st  &  Ref 4s,  1934 

Chic.,  St.  P.,  Minn  &  0.  Ry.  Cons.  Mtge 3i/2s,  1930 

Chic.,  St.  P.,  Minn  &  O.  Ry.  Cons.  Mtge 6s,  1930 

Chic.,  St.  Paul  &  Minn.  1st 6s,  1918 

Chic.  &  St.  Louis  1st 6s,  1915 

Chic.,  St.  Louis  &  Pitts.  Cons 5s,  1932 

Chic.,  Santa  Fe  &  Cal.  1st  Mtge 5s,  1937 

Cleveland  &  Pitts.  Genl.  Mtge 4y2s,  1942 

Cleveland  &  Pitts.  Genl.  Mtge 3y2s,  1942 

Cleve.  &  Pitts.  Genl.  Mtge 3i/2s,  1948 

Cleve.  &  Pitts.  Genl.  Mtge 3y2s,  1950 

Col.,  Conn.  &  Term.  1st  Mtge 5s,  1922 

Dak.  &  Gt.  So.  1st  Mtge 5s,  1916 

Daiibury  &  Norwalk  Cons.  Mtge 5s,  1920 

Danbury  &  Norwalk  Cons.  Mtge 6s,  1920 

Del.  &  Hud.  Canal  Co.,  Penn.  Div.  1st 7s,  1917 

Del.  &  Hud.  1st  &  Ref.  Mtge 4s,  1943 

Del.  R.  R.  &  Bridge  Co.  1st  Mtge 4s,  1936 

Dexter  &  Newport  R.  R.  1st  Mtge 4s,  1917 

Dexter  &  Piscataquis  1st  Mtge 4s,  1929 

East  R.  R.  of  Minn.  No.  Div.  1st  Mtge 4s,  1948 

Erie  &  Pittsburgh  Genl.  Mtge 3y2s,  1940 

European  &  North  Amer.  Ry.   1st 4s,  1933 

Evans,  Henderson  &  Nashville 6s,  1919 

Fargo  &  Southern  1st  Mtge 6s,  1924 

Fayette  &  McMinville  Br.   1st 6s,  1917 

Fonda,  Johnstown  &  Gloversville  Cons 6s,  1921 

Fonda,  Johnstown  &  Gloversville  Cons.  Ref ^/^s,  1947 

Fonda,  Johnstown  &  Gloversville  Genl.  Ref 4s,  1950 

Fonda,  Johnstown  &  Gloversville  Genl.  Ref 4y2s,  1952 

Fremont,  Elk  &  Mo.  Val.  Cons 6s,  1933 


304  LIST   OP   INVESTMENTS. 

Genesee  &  Wy.  Val.  R.  R.  Co.  1st  Mtge 5s,  1929 

Gt.  Nor.  Ry.  Co.  1st  Mtge.  &  Ref 4143,  1961 

Greenwich  &  Johnsonville  1st  Mtge 4s,  1924 

Harrisburg,  Ports.  &  Mt.  J.  &  Lan.  1st 4s,  1913 

Housatonic  R.  R.  Cons.  Mtge 5s,  1937 

Illinois  Central  R.  R.  Co.,  Cairo  Bridge 4s,  1950 

Illinois  Central  R.  R.  Co.,  1st  Gold 3i/2s,  1951 

Illinois  Central  R.  R.  Co.,  1st  Gold 4s,  1951 

Illinois  Central  R.  R.  Co.,  1st  Sterling  Ext 4s,  1951 

Illinois  Central  R.  R.  Co.,  1st  Sterling  Ext 3i/2s,  1950 

Illinois  Central  R,  R.  Co.,  1st  Sterling 3s,  1951 

Illinois  Central  R.  R.  Co.,  1st  Ext.  Gold 3y2s,  1951 

Illinois  Central  R.  R.  Co.,  Litchfield  Div 3s,  1951 

Illinois  Central  R.  R,,  Purchased  Line  1st 3y2s,  1952 

Illinois  Central  R.  R.,  Refunding  Mtge 4s,  1955 

Illinois  Central  R.  R.,  Springfield  Div.  1st 3y2s,  1951 

Illinois  Central  R.  R.,  St.  L.  Div.  &  T.  1st 3s,  1951 

Illinois  Central  R.  R.,  St.  L.  Div.  &  T.  1st 3y2s,  1951 

Illinois  Central  R.  R.  Co.,  Sterling  Coll.  Tr : .  .3y2s,  1950 

Iowa,  Minn.  &  No.  W.  1st  Mtge 3y2s,  1935 

June.  R.  R.  Genl.  Mtge 3y2s,  1930 

Kalamazoo  &  White  Pigeon  1st  Mtge 5s,  1940 

Kankakee  &  So.  W 5s,  1921 

La  Crosse  &  Davenport  1st  Mtge « 5s,  1919 

Lake  Shore  &  Mich.  So.  Ry.  1st  Genl 3y2s,  1997 

Lehigh  Valley  R.  R.  1st  Mtge 4s,  1948 

Lincoln  Park  &  Charlotte  1st  Mtge 5s,  1939 

Louisville  &  Nashville  R.  R.  Co.  1st  Mtge 5s,  1937 

Louisville  &  Nashville  R.  R.   Genl 6s,  1930 

Louisville  &  Nashville  R,  R.  Co.  Unif 4s,  1940 

Louisville,  Cin.  &  Lex.  Genl.  Mtge 4y2s,  1931 

Mahoning  Coal  R.   R.   1st  Mtge 5s,  1934 

Maine  Shore  Line  1st  Mtge 6s,  1923 

Man.  Ry.  Co.  Cons.  Mtge 4s,  1990 

Man.  Ry.  Co.  Deb 5s,  1916 

Mankato   &  New  Ulm  1st  Mtge 3y2s,  1929 

Mich.  Central  R,  R.  Co.  1st  Mtge 3y2s,  1952 

Mil.  &  No.  1st  Mtge.  Ext 4y2s,  1913 


NEW    YORK.  305 

Mil.  &  No.  Cons.  Mtge 6s,  1913 

Milwaukee,  Lake  Shore  &  West.  Ext.  &  Imp 5s,  1929 

Milwaukee,  Lake  Shore  &  West.  1st  Mtge 6s,  1921 

Milwaukee,  Lake  Shore  &  W.,  Ash.  Div.  1st  Mtge 6s,  1925 

Milwaukee,  L.  S.  &  W.,  Marshfield  Ext.  1st  Mtge 5s,  1922 

Milwaukee,  L.  S.  &  West.,  Mich.  Div.  1st  Mtge 6s,  1924 

Minn.  &  Iowa  1st  Mtge 3y2s,  1924 

Minn.  &  So.  Dak.  1st  Mtge 3y2s,  1935 

Minn.,  St.  Paul  &  Sault  Ste.  Marie  Ry.  Co.  1st  Cons.  .4s,  1938 

Minn.,  Sault  Ste.  Marie  &  Atl.  Ry.  Co.  1st  Mtge 4s,  1926 

Minneapolis  &  Pacific  Ry.  Co.  1st  Mtge . .  .4s,  1936 

Minneapolis  Union  1st  Mtge 5s,  1922 

Minneapolis  Union  1st  Mtge 6s,  1922 

Mobile  &  Ohio  R.  R.  Co.  1st  Mtge 6s,  1927 

Mohawk  &  Malone  1st  Mtge 4s,  1991 

Mohawk  &  Malone  Cons.  Mtge 3y2s,  2002 

Montana  Central  Ry.  1st  Mtge 5s,  1937 

Montana  Central  Ry.  1st  Mtge : 6s,  1937 

Montgomery  &  Erie  R.  R.  1st  Mtge 5s,  1926 

Morris  &  Essex  Cons.  Mtge 7s,  1915 

Morris  &  Essex  1st  &  Ref 3y2s,  2000 

Nash.,  Chatt.  &  St.  L.  Ry.  1st  Mtge 7s,  1913 

Nash.,  Chatt.  &  St.  L.  Ry.  Co.  1st  Cons 5s,  1928 

Nash.,  Chatt.  &  St.  L.  Ry.  Cen.  Br.  1st 6s,  1923 

Nash.,  C.  &  St.  L.  Ry.,  Jas.  Br.  Ext.  1st 6s,  1923 

Nash.,  C.  &  St.  L.  Ry.,  Lebanon  Br.  1st 6s,  1917 

Nash.,  C.  &  St.  Ry.,  Tracy  City  Br.  1st 6s,  1917 

Naugatuck   R.   R.    1st    Mtge 4s,  1954 

New  England  R.  R.  Cons.  Mtge 4s,  1945 

New  England  R.  R.  Cons.  Mtge 5s,  1945 

New  Haven  &  Derby  Cons.  Mtge 5s,  1918 

New  Haven  &  Northampton  Ref.  Cons 4s,  1956 

New  River  R.  R 6s,  1932 

New  York  &  Harlem  Ref 3y2s,  2000 

New  York,  C.  &  H.  R.  R.  Co.  1st  Ref 3i/2s,  1997 

New  York  Cent.  &  H.  River  R.  R.  Co.  Ref.  &  Imp..  .  .4y2s,  2013 

New  York,  Chic.  &  St.  L.  R.  R.  1st 4s,  1937 

New  York,  Lack.  &  West.  1st  Mtge 6s,  1921 


306  LIST   OF  •  INVESTMENTS. 

New  York,  Prov.  &  Boston  Genl.  Mtge 4s,  1942 

Nodaway  Valley  1st  Mtge 7s,  1920 

Norfolk  &  West.  Ry.  Co.  Cons 4s,  1996 

Norfolk  &  West.  Ry.  Co.  Genl.  Mtge 6s,  1931 

Norfolk  &  West.  Ry.  Co.  Imp.  &  Ex 6s,  1934 

Northern  California  Ry.  1st 5s,  1929 

Northern  Pae.  Ry.  Prior  Lien 4s,  1997 

Northern  Ry.   1st. 5s,  1938 

North  West,  Union  1st  Mtge.  (due  June) 7s,  1917 

North  Wis.  1st  Mtge 6s,  1930 

Norwood  &  Montreal  1st  Mtge 5s,  1916 

Oswego  R.  R.  Bridge  1st 6s,  1915 

Pawtucket  Valley  1st  Mtge 4s,  1925 

Penn.  R.  R.  Cons.  Mtge • 5s,  1919 

Penn.  R,  R.  Cons.  Mtge 4s,  1943 

Penn.  R.  R.  Cons.  Mtge .' . .  .3y2s,  1945 

Penn.  R.  R.  Cons.  Mtge 4s,  1948 

Penn.  R.  R.  Real  Estate  1st  Mtge 4s,  1923 

Penobscot  Shore  Line  1st 4s,  1920 

Peoria  &  No.  West.  1st  Mtge. 3y2s,  1926 

Phila.  &  Reading  4th  (now  1st) .5s,  1933 

Phila.  &  Erie  Gen.  Mtge .6s,  1920 

Phila.  &  Erie  Genl.  Mtge.    (due  July) 5s,  1920 

Phila.  &  Erie  Genl.  Mtge.  (due  July) 4s,  1920 

Phila.,  Balto.  &  Wash.  1st  Mtge 4s,  1943 

Phila.,  Wilmington  &  Baltimore  Deb 4s,  1917 

Phila.,  Wilmington  &  Baltimore  Deb 4s,  1922 

Phila.,  Wilmington  &  Baltimore  Deb 4s,  1926 

Phila.,  Wilmington  &  Baltimore  Deb. 4s,  1932 

Pitts.  &  Lake  Erie  R.  R.  1st 6s,  1928 

Pitts.,   Chartiers  &   Young.   Gen.   Mtge 4s,  1932 

Pitts.,  C.,  C.  &  St.  L.  Ry.  Cons.  Ser.  A 4i/2s,  1940 

Pitts.,  C.,  C.  &  St.  L.  Ry.  Cons.  Ser.  B 4y2s,  1942 

Pitts.,  C.,  C.  &  St.  L.  Ry.  Cons.  Ser.  C 4y2s,  1942 

Pitts.,  C.,  C.  &  St.  L.  Ry.  Cons.  Ser.  D 4s,  1945 

Pitts.,  C.,  C.  &  St.  L.  Ry.  Cons.  Ser.  E 3y2s,  1949 

Pitts.,  C.,  C.  &  St.  L.  Ry.  Cons.  Ser.  F 4s,  1953 

Pitts.,  C.,  C.  &  St.  L.  Ry.  Cons.  Ser.  G 4s,  1957 


NEW    YORK.  307 

Pitts.,  C.,  C.  &  St.  L.  Ry.  Cons.  Ser.  H 4s,  1960 

Pitts.,  Va.  &  Charlestown  1st  Mtge 4s,  1943 

Portsmouth,  Great  Falls  &  Conway 4y2s,  1937 

Princeton  &  No.  W.  1st  Mtge 3y2s,  1926 

Prov.  &   Springfield   1st  Mtge 5s,  1922 

Rensselaer  &  Saratoga  Cons.  Mtge 7s,  1921 

Republican  Valley  1st  Mtge 6s,  1919 

Rochester  &  Pitts.  1st  Mtge 6s,  1921 

Roch.  &  Pitts.  Cons.  Mtge 6s,  1922 

Rome,  "W.  &  0.  Cons,    (due  July) 3y2s,  1922 

Rome,  W.  &  0.  Cons,    (due  July) 4s,  1922 

Rome,  W.  &  O.   Cons,    (due  July) 5s,  1922 

Rome,  Watertown  &  Ogdensburg  Term.  1st 5s,  1918 

St.  Paul  &  No.  Pac.  Ry.  Genl.  Mtge. 6s,  1923 

St.  Paul  &  Sioux  City  1st  Mtge 6s,  1919 

St.  Paul,  Minn.  &  Man.  Ry.  Cons 4s,  1933 

St.  Paul,  Minn.  &  Man.  Ry.  Cons -. 4y2s,  1933 

St.  Paul,  Minn.  &  Man.  Ry.  Cons 6s,  1933 

St.  Paul,  Minn.  &  Man.,  Montana  Ext 4s,  1937 

St.  Paul,  Minn.  &  Man.  Pac.  Ext 4s,  1940 

Sault  Ste  Marie  &  S".  W.  1st  Mtge 5s,  1915 

Schenectady  &  Duaneburg  1st  Mtge 6s,  1924 

Scioto  Valley  &  New  England  1st  Mtge 4s,  1989 

Sioux  City  &  Pacific  1st  Mtge 3y2s,  1936 

Southern  Iowa  1st  Mtge 3y2s,  1925 

Southern  Pacific  Br.  Ry.  1st  Mtge 6s,  1937 

Southern  Pacific  R.  R.  of  Cal.  1st  Cons 5s,  1937 

Southern  Pacific  R.  R.  1st  and  Ref 4s,  1955 

Southwest  Penn.  1st  Mtge    7s,  1917 

Spokane  Falls  &  No.  Ry.  1st  Mtge 6s,  1939 

Steubenville  &  Ind.  1st  Mtge 5s,  1914 

Sturgis,  Goshen  &  St.  L.  1st  Mtge 3s,  1989 

Sunbury  &  Lewiston  1st  Mtge 4s,  1936 

Sunbury,  Hazelton  &  Wilkes-Barre  1st 5s,  1928 

Syracuse,  Phoenix  &  Osw.  1st  Mtge 6s,  1915 

Tarkio  Valley  1st  Mtge 7s,  1920 

Terre  Haute  &  Indianapolis  Cons.  Mtge 5s,  1925 

Ticonderoga  R.  R.  1st  Mtge 6s,  1921 


308  LIST   OF   INVESTMENTS. 

Union  Pacific  B.  R,  Co.  1st  Mtge 4s, 

Union  Pac.  R.  R.  Co.  1st  &  R.   (due  June) 4s, 

United  N.  J.  R.  R.  &  Canal  Co.  Genl 4s, 

United  N.  J.  R.  R.  &  Canal  Co.  Genl 4s, 

United  N.  J.  R.  R.  &  Canal  Co.  Genl 4s, 

United  N.  J.  R.  R.  &  Canal  Co.  Genl 4s, 

United  N.  J.  R.  R.  &  Canal  Co.  Genl ..3y2s,  1951 

Upper  Coos  R.  R.  Ext 4i/2s,  1930 

Upper  Coos  R.  R.  1st  Mtge 4s,  1930 

Utica  &  Black  River  1st  Mtge 4s,  1922 

Utica,  Clinton  &  Bing.  1st  Mtge 5s,  1939 

Vandalia  Ry.  Co.  Cons.  Mtge.,  Ser.  A 4s,  1955 

Vandalia  Ry.  Co.  Cons.  Mtge.,  Ser.  B 4s,  1957 

Warren  R.  R.  1st  Ref.  Mtge 3y2s,  2000 

West  Chester  R.  R.  1st  Mtge 5s,  1919 

Western  Penna.  Cons.  Mtge 4s,  1928 

Wilmar  &  Sioux  Falls  Ry.  1st  Mtge 5s,  1938 

Winona  &  St.  Peter  Ext.  1st 7s,  1916 

Wisconsin  &  Minn.  1st  Mtge 5s,  1921 

Wisconsin   Northern   1st  Mtge 4s,  1931 

Wisconsin  Valley  1st ' 6s,  1920 


INDEX. 

ACQUIESCENCE  BY  BENEFICIARY  IN   UNAUTHORIZED  INVESTMENTS.   5 
ALABAMA 

Continuing  business  of  testator,  17 

Guardians,  16,  17 

Investments  in  other   states,   16 

Public  securities,  16 

Purchase  of  trust  property  by  trustee,  17 

Trustee  may  not  profit  from  estate,  17* 
ALASKA,  18 
ARIZONA,  19 
ARKANSAS 

Executors  and  administrators,   20 

Guardians,  20 

Dealing  with  trust  property,  21 

BENEFICIARIES,  CONSENT  OF  TO  UNAUTHORIZED  INVESTMENT,  5 
BONDS  OF  CORPORATIONS,  10 
BUSINESS,  CONTINUING,  14 
CALIFORNIA 

Advice    of   attorney,    35 

Authorized   securities,   must   invest   in,    36 

Bonds  legal  in  New  York  and  Massachusetts,    30 

Business,  continuing,  36 

Certificates  issued  by  corporations,  30 

Continuing  business  of  testator,  36 

Corporation  certificates,  30 

Corporate  bonds,  26 

Corporate  stocks  and  bonds,  limitations  thereon,  33 

Deposit  of  funds  in  bank,  37 

Diligence  required,  22,  35 

Directions  in  trust  instrument,   22 

Giving  away  worthless  securities,  36 

Good  faith  required,  22,  35 

Guardians,  36 

Individual  name,   taking  loans  in,  37 

Interest,  22 

Liability  of  trustee  for  unauthorized  loan,  35 

Limitations  on  corporate   bonds  and   stock,  33 

Limitations  on  bonds  legal  in  New  York  and  Massachusetts,  33 

309 


310  INDEX. 

CALIFORNIA — Continued 

Limitations  on  public  utility  bonds,  32 

Loans  on  unsecured  notes,  32 

Massachusetts,  may  invest  in  bonds  legal  for  savings  banks  in,  30 

Mingling  trust  funds,  23,  34,  35 

Mining  stock,  34 

Mortgages  on  real  estate,  29,  33 

New  York,  may  invest  in  bonds  legal  for  savings  banks  in,  30 

Omission  to  invest,  22 

Public  securities,  24 

Public  utility  corporation  bonds,  32 

Purchase  of  property,  24 

Purchase  of  trust  property  by  trustee,  35 

Railroad  bonds,  26 

Real  estate  mortgages,  29,  33 

Savings  banks,  23          • 

Street  railway  bonds,  27 

Trust  companies,  23,  35 

Trust  funds  to  be  kept  separate,  34 

Trustee  not  to  profit,  22,  35 

Unsecured  notes,  loans  on,  32 
CERTIFICATES  OF  DEPOSIT,  13 
COLORADO 

Authorization  by  court,  40 

Bonds  of  corporations,  39 

Mingling  trust  funds,  40 

Purchase  of  trust  property,  39 

Stock  of  corporations,  39 

Trust  companies,  38 

Trustees  generally,  39 

COMBINING  FUNDS  OF  SEVERAL  ESTATES  IN  ONE  MORTGAGE,  7 
CONNECTICUT 

Bank  stock,  56 

Bonds  purchased  at  a  premium,  59 

Bonds  of  railroad  corporations,   43 

Bridge  company  bonds,  45,  47 

Business,  continuing,  58 

Changing  investments  to  authorized  securities,  59 

Chattel  mortgages,  59 

Consolidation  of  corporations,  effect  on  investments,  52 

Continuing  business,  58 

Continuing  investments,  41 

Converting  investments  into  authorized  securities,  59 

Corporate  stock,  58 

Corporate  bonds,  43 

Damages  for  improper  investments,  60 


INDEX.  311 

CONNECTICUT — Continued 

Default  by  corporation  on  bonds,  effect  of,  51 

Depot  company  bonds,  45,  47 

Diligence  defined,  59 

Effect  of  default  by  corporation  on  bonds,  51 

Equipment  trust  notes  of  corporations,  53 

Individual  name,  investment  in,  58 

Legality   of   bonds   \vhen   property   is   transferred   to    another    cor- 
poration,   52 

List   of   legal  investments,    260 

Limitations  on  bonds  of  railroad  corporations,  48,  52 

Mortgage  bonds  defined,  49 

Mortgages  in  other  states,  60  . 

Mortgages  on  real  estate,  41,  56 

Municipal  bonds,  43 

Xame  of  trustee,  investment  in,  58 

Other  states,  mortgages  in,  60 

Personal  benefit,  trustee  not  to  obtain,  59 

Personal  securities,  59 

Property  of  railroad  corporation  transferred  to  another  corporation, 
effect  on  bonds,  52 

Public  securities,  42 

Kailroad  bonds,  43,  45,  47 

Real  estate  mortgages,  56 

Retaining  investments,  60 

Stock  of  corporations,  58 

Savings  banks,  41 

Street  railway  corporation  bonds,  45,  47,  54 

Telephone  company  bonds,  55 

Terminal  company  bonds,  45,  47 

Trust  company  stock,  56 

Trust  notes  of  corporations,  53 

Trustees  generally,  41 

Water  company  bonds,  55 

CONSENT  OF  BENEFICIARIES  TO  UNAUTHORIZED  INVESTMENTS,  5 
CONTINUING  BUSINESS  OF  TESTATOR,  14 
CONTINUING  INVESTMENTS  MADE  BY  CREATOR  OF  TRUST,  1 
CORPORATE  BONDS,  10 
CORPORATE  STOCK,  11 

CREATOR  OF  TRUST,  CONTINUING  INVESTMENTS  MADE  BY,  1 
DELAWARE 

Co-administrators,  liability  of,  64 

Collateral  trust  bonds,  62 

Continuing  investments,  62 

Corporate  bonds,  62 

Deposit  in  bank,  64 


312  INDEX. 

DELAWARE — Continued 

Guardians,  63 

Municipal  bonds,  61 

Orphan's  court,  power  of,  63 

Public  securities,  61 

Public  service  corporation  bonds,  62 

Purchase  of  trust  property  by  trustee,  64 

Purchase  at  mortgage  foreclosure,  64 

Eailroad  bonds,  62 

Transportation  company  bonds,  62 

Trust  certificates,  62 

Trustee  not  to  profit  from  estate,  63 
DEPOSIT  IN  BANK,  4,  13 
DIRECTIONS  IN  TRUST  INSTRUMENT,  3 
DISTRICT  OF  COLUMBIA 

Duty  to  apply  to  probate  court,  65,  66 

Duty  to  invest,  66 

Good  faith  required,  66 

Mingling  trust  funds,  66 

Power  to  sell,  66 

Probate  court,  power  of,  65,  66 

Purchase  of  trust  property,  64,  66 

Sale  of  non-productive  securities,  66 
DUTY  TO  INVEST,  3 
FLORIDA 

Bank  stock,  67 

Continuing  business,  68 

Deposit  in  bank,  67 

Failure  to  obtain  approval  of  court,  69 

Guardians,  67 

Mortgages  on  real  estate,  69 

Personal  securities,  69 

Purchase  by  trustee,  69 

Eeal  estate  mortgages,  69 

Stock  of  bank,  67 

Trust  companies,  69 

Trustee  not  to  profit,  70 
GEORGIA 

Administrator,  72 

Changing  investments,  73 

Confederate  bonds,  74 

Continuing  business,  73 

Failure  to  report  to  court,  71 

Good  faith,  74 

Land,  investment  in,  73 

Municipal  bonds,  72 


INDEX.  313 

GEORGIA — Continued 

Order  of  court,  71 

Personal  benefit  by  trustee,  73 

Personal  securities,  74 

Public  securities,  72 

Purchase  by  trustee,  74 

Eatification  of  unauthorized  investments  by  beneficiary,  74 

Trust  company  stock,  74 
HAWAII,  75 
IDAHO,  77 
ILLINOIS 

Acquiescence  by  beneficiary,  82 

Bonds  of  corporations,  79 

Business  or  trade,  81 

Business,  continuing,  81 

Corporate  bonds,  79 

Corporate  stock,   81 

Guardians,  80 

Interest,  81 

Investment  in  name  of  trustee,  80 

Mortgages  on  real  estate,  79 

Municipal  bonds,  79 

Name  of  trustee,  investment  in,  80 

Other  states,  mortgages  in,  79,  80 

Partnership,  investment  in,  81 

Personal  securities,  guardians,  80 

Power  to  lease,  81 

Power   to    mortgage,    81 

Public  securities,  79 

Stock  of  corporations,  81 

Trade  or  business,  81 

Trust  companies,  79 
INDIANA 

Bank  stock,  84 

Continuing  partnership,  85 

Corporate  stock,  84 

Deposit  in  bank,  84 

Diligence   in  examining  title,   86 

Duty  to  invest,  85 

Guardians,   85 

Loan  and  deposit  companies,  83 

Loan  to  relatives,  84 

Mingling   trust   funds,   85 

Mortgages  on  real  estate,  83 

Name  of  trustee,  deposit  in,  84 

Partnership,  continuing,  85 


314  INDEX. 

INDIANA — Continued 

Personal  security,  individual  credit,   85 

Profit  from  estate,  trustee  not  to  make,  84 

Real  estate  mortgages,  83 

Second  mortgages,  85 

Stock  of  corporations,  84 

Trustee  not  to  profit  from  estate,  84 

Title,  diligence  in  examining,  86 
INVESTMENTS  LEGAL  IN  ALL  STATES 

Public  securities,  9 

Eeal  estate  mortgages,  9 
INVESTMENTS  NOT  LEGAL  IN  ALL  STATES 

Certificates  of  deposit,  13 

Corporate  bonds,  10 

Corporate  stock,  11 

Personal   securities,   12 

Second  mortgages,  12 

Municipal  bonds,  10 
IOWA 

Changing  investments,  order  of  court,  87 

Deposit  in  bank,  88 

Guardians,  88 

Interest,  88 

Mingling  trust  funds,  89 

Mortgages  on  real  estate,  87 

Order  of  court,  necessity  for,  87,  88 

Public  securities,  87 

Time  allowed  for  investment,  88 

Trust  companies,  88 
KANSAS,  90 
KENTUCKY 

Bank  stock,  94 

Business,  carrying  on,  94 

Continuing  investments  made  by  creator  of  trust,  94 

Corporate  bonds,  92 

Failure  to  invest,  interest  chargeable,  94 

Guardians,  95 

Interest  chargeable  for  failure  to  invest,  94 

Mingling  trust  funds,  94 

Mortgages  in  other  states,  95 

Mortgages  on  real  estate,  92 

Municipal  bonds,  92 

Order  of  court,  92 

Other  states,  mortgages  in,  95 

Personal  profit  from  estate,  94 

Provisions  of  trust  instrument  to  be  followed,  93 


INDEX.  315 

KENTUCKY — Continued 

Bailroad  and  corporate  bonds,  92 

Sale  and  reinvestment,  92 

Stock  of  bank,  94 
LIST  OF  INVESTMENTS  LEGAL  IN  CONNECTICUT,  MASSACHUSETTS  AND  NEW 

YORK,  258 
LOUISIANA 

Advice  of  court,  99 

Canal  company  bonds,  97 

Continuing  business  of  testator,  99 

Credit,  may  not  invest  on,  99 

Deposit  in  bank,  96,  98 

Duty  to  invest,  98 

Family  meeting  and  advice  of  court,  99 

Guardians,  97 

Individual  name,  trustee  may  not  invest  in,  98 

Mortgages  on  real  estate,  97 

Municipal  bonds,  97 

Public  securities,  96,  97 

Eailroad  bonds,  97 
MAINE 

Authorization  of  court,  101 

Corporate  stocks  and  bonds,  102 

Duty  of  trustee,   measure  of,   102 

Guardians,  101 

Interest,  102  , 

Personal  security,  102 

Profit  by  trustee  from  estate,  103 

Eepairs,  when  considered  an  investment,  101 

Sale  by  trustee,  101,  102 

Second  mortgages,   102 

Stock  of  corporations,  102 

Trust  companies,  100 

Trustees  generally,  101 
MARYLAND 

Administrators  and  guardians,  105 

Bank  stock,  119 

Bonds  of  corporations,   108 

Changing  investments,   119 

Consent  of  beneficiaries,  120 

Corporate  stock,  119,  120 

Courts  of  Baltimore,  rule  of,  105 

Discretion  of  trustee,   120 

Equipment  bonds,   115 

Gas  and  miscellaneous  securities,  117 

Good  faith  required,  118 


316  INDEX. 

MAEYLAND — Continu  ed 

Guardians,  104,  120 

Municipal  bonds,  107 

Name  of  ward,  investment  in,  105 

Order  of  court,  104,  119 

Personal  benefit  by  trustee,  118 

Personal  security,  119 

Public  securities,  106 

Eailroad  bonds,  108 

Eeal  estate  mortgages,  118 

Eule  adopted  by  courts  of  Baltimore,  105 

Second  mortgages,  130 

Stock  of  certain  corporations,  119 

Street  railway  bonds,  116 

Value,  determination  of,  120 
MASSACHUSETTS 

Bank  stock,  137 

Bonds  of  corporations,   122,  126,   142 

Bonds  not   to   be   illegal  for  temporary  failure   of   corporation   to 
meet  requirements,  133 

Business,  may  not  invest  in,  143 

Certificates  of  deposit,  143 

Continuing  business  of  testator,  121 

Continuing  investments  made  by  creator  of  trust,  142 

Consolidation  of  corporations,  effect  of,  134 

Corporate  notes,  122 

Corporate  stock,  141 

Deposits  in  bank,  137 

First  mortgage  bonds  defined,  130 

Full  power  to  invest,  meaning  of,  143 

Guaranteed  bonds  of  railroad  corporations,   132 

Guardians,   144 

Improvements,  right  to  make,  144 

List  of  legal  investments,  281 

Loans  outside  of  state,  121 

Mingling   trust   funds,    122 

Mortgages  on  real  estate,  123 

Municipal  bonds,  122,  125 

Notes  of  corporations,  122 

Other  states,  investments  in,  121,  140 

Percentage  of  funds  which  may  be  invested  in  fluctuating  securi- 
ties, 142 

Personal  security,  137 

Public  securities,  122,  124,  125 

Purchase  by  trustee,  143 

Purchase  for  benefit  of  estate,  143 


INDEX.  317 

MASSACHUSETTS — Continued 

Eailroad  bonds,  122,  126 

Real  estate  mortgages,  123 

Refunding  bonds,  133 

Repairs,  144 

Retaining  investments,  142 

Savings  banks,  123 

Second  mortgages,   141 

Stock  of  banks  and  trust  companies,  137,  142 

Stock  of  corporations,  141,  142 

Street  railway  bonds,  136 

Telephone  company  bonds,  136 

Trust  company  stock,   137,   142 

Underlying  bonds,   132 

Value  of  real  estate  mortgages,  direction  to  ascertain,  124 

Value,  judgment  as  to,  143 
MICHIGAN 

Business,  carrying  on,  146 

Business,  purchasing,  147 

Care  required,  146 

Continuing  business  of  creator  of  trust,  148 

Corporate  stock,  147 

Deposit  in  savings  bank,  147 

Duty  of  trustee,  146 

Guardians,  145,  147 

Interest,  146 

Mingling  trust  funds,  147 

Mortgages  on  real  estate,  147 

Municipal  bonds,  145 

Neglect  to  invest,  146 

Personal  security,  147 

Personal  benefit  by  trustee,   147 

Probate  court,  power  of,  145 

Public  securities,  145 

Purchase  by  beneficiaries,  146 

Real  estate  mortgages,  145 

Sale  of  property,  146 

Stock  of  corporations,  147 

Unsecured  notes,  147 
MINNESOTA 

Accumulations,  investment  of,   149 

Authorized   securities,    149,   152 

Bonds  of  railroads,  151 

Continuing  investments  made  by  creator  of  trust,  149 

Debenture  stock  of  railroads,  151 

Interest,   152 


318  INDEX. 

MINNESOTA — Continued 

Mingling  trust  funds,   152 

Mortgages  on   real  estate,    150 

Municipal  bonds,  150 

Neglect  to  invest,  152 

Personal  benefit  by  trustee,  152 

Purchase  of  its  own  mortgages  by  a  trust  company,  152 

Public  securities,   150 

Eailroad  bonds,  151 

Eeal  estate  mortgages,  150 

Eetaining  investments,  149 

Stock  of  railroad  corporations,   151 

Trust  companies,  149 
MISSISSIPPI 

Corporate  stock,  154 

Court,  order  of,  153,  154 

Diligence  required,  153 

Duty  to  invest,  154 

Guardians,   153 

Interest,   154 

Personal  benefit  by  trustee,  154 

Stock  of  corporations,  154 

Time  allowed  to  invest,  154 
MISSOURI 

Care  required,   156 

Court,  order  of,  155 

Donation  to  improve  adjoining  property,  156 

Guardians,  156 

Incorporation  of  estate,   156 

Interest,  155 

Mortgages  on  real  estate,  155,  163,  164 

Municipal  bonds,  155 

Public  securities,  155 

Trust  companies,   155 
MONTANA,   157 
MUNICIPAL  BONDS,  10 
NEBRASKA,  159 
NEVADA,  161 
NEW  HAMPSHIRE 

Books  to  be  kept,  169 

Bank  and  trust   company  stock,   168 

Continuing  business  of  testator,  171 

Continuing  investments,  164 

Corporate  bonds  and  stocks,  166,  167,  168 

Corporate  notes,   165 

Deposit  by  trust  company  in  savings  department,  171 


INDEX.  319 


NEW  HAMPSHIRE — Continued 

Duty  to  invest,  170 

Express  company  bonds,   168 

Guardians,  170 

Mingling  trust  funds,  170 

Mortgages  on  real  estate,  163,  164 

Mortgages  in  other  states,  165,  171 

Municipal  bonds,  163,  165,  166 

Notes  secured  by  collateral,  165 

Notes   of   corporations,    168 

Other  states,  investment  in,  165 

Personal  securities,   165,   170 

Public  securities,  163,  165 

Eailroad  bonds,  166 

Eeal  estate  mortgages,  155,  163,  164 

Savings  banks,   164 

Stocks  of  banks  and  trust  companies,  168 

Stocks  of  corporations,  168,  171 

Street  railway  company  bonds,  167 

Telephone  and  telegraph  company  bonds,  168 

Value,  171 
NEW  JERSEY 

Acquiescence  of  creator  of  trust,  181 

Administrator,   investments  pending  litigation,  181 

Authorized  investments,  172 

Bonds  of  railroad  companies,  174,  176 

Business  or  trade,  180,  182 

Cash  dividends,  investment  in  stock,  182 

Collateral  security,  loans  on,  177 

Continuing  investments,  172,  180 

Corporate  stock,  179 

Duty  to  invest,  180 

Improvements,    180 

Interest,  182 

Mingling  trust  funds,  178 

Mortgages  on  real  estate,  172,  174,  176,  179 

Municipal  bonds,  172,  174,  175,  181 

Officers,  loans  to  by  trust  companies,  178 

Order  of  court,   182 

Other  states,  investments  in,  181 

Personal  security,  179 

Personal  benefit  by  trustee,  180 

Public  securities,  172,  173,  175,  179 

Purchase  by  trustee,  179 

Eeal  estate,  177 

Eeal  estate  mortgages,  172,  174,  176,  179 


320  INDEX. 

NEW  JERSEY — Continued 

Kailroad  bonds,   174,   176 

Savings  banks,  173,  175 

Second  mortgages,  181 

Stock  of  corporations,  179,  181 

Time  allowed  to  invest,  181 

Trade  or  business,  180 
NEW  MEXICO,  183 
NEW  YORK 

Beneficiaries,  ratification  by,  196 

Bonds  of  railroads,  187 

Business,  not  to  invest  in,  194 

Consolidation  of  railroads,  effect  of  on  investments,  192 

Continuing  business  of  creator  of  trust,  194 

Continuing  investments,   195 

Corporate  bonds  and  stock,  187,  195 

Deposit  in  bank,  194 

Interest,   185 

List  of  legal  investments,  300 

Mortgages  on  real  estate,  187 

Municipal  bonds,  186 

Personal  securities,  194 

Public  securities,  185 

Eailroad  bonds,  187 

Ratification  by  beneficiaries,  196 

Eeal  estate,  taking  for  debt,  193 

Eeal  estate  mortgage,  187 

Other  states,  investments  in,  196 

Savings  banks,  185 

Second  mortgages,  195 

Stock  of  corporations,  195 

Street  railways  not  considered  railroads,  193 

Time  allowed  for  disposing  of  unauthorized  investments,  195 
NORTH  CAROLINA 

Confederate  notes,  199 

Deposit  in  bank,  198 

Duty  to  invest,  198 

Mortgages  on  real  estate,  197 

Other  states,  investment  in,  198 

Personal  profit  by  trustee,  198 

Personal  securities,  197 

Third  mortgages,   198 
NORTH  DAKOTA,  200 
OHIO 

Approval  of  court,  206 

Bank  stock,  208 


INDEX.  321 

OHIO — Continued 

Bonds  of  corporations,   202,  204 

Business,  continuing,  207 

Care  required,  207 

Changing  investments  to  legal  securities,  206 

Continuing  investments,  206 

Continuing  business,  207 

Converting  real  estate  into  money,  207 

Corporate  stock  and  bonds,  202,  204 

Deposit  in  bank,  204 

Directions  in  trust  instrument,  208 

Duty  to  invest,  206 

Ground  rents,  202 

Guardians,  205 

Mingling  trust  funds,  203,  207 

Mortgages  on  real  estate,  202,  205,  208 

Municipal  bonds,  204 

Notes  secured  by  collateral,  202 

Participating  mortgages,  203 

Personal  security,  202,  204,  208 

Public  securities,  204 
Purchase  of  real  estate,  206 

Second  mortgages,  208 

Stock  of  corporations,  202 
Stock  of  banks,  208 

Value  of  real  estate,  203,  205 
OKLAHOMA,  209 
OREGON,  211 

OTHER  STATES,  SECURITIES  IN,  12 
PARTICIPATING  MORTGAGES,  7 
PENNSYLVANIA 

Bonds  of  corporations,  investments  in  prohibited,  213,  218 

Carrying  on  business,  216 

Continuing  investments,  217 

Corporate  stock,  213,  218 

Court  order,  necessity  of,  213,  215,  219 

Deposit  in  bank,  216 

Depreciation  of  securities,  219 

Duty  to  invest,  215 

Ground  rents,  214 

Guardians,  213 

Interest,  217 

Mingling  trust  funds,  218 

Mortgages  on  real  estate,  214 

Municipal  bonds,   215 

Order  of  court,  213,  215 


322  INDEX. 

PENNSYLVANIA — Continued 

Other  states,   investment  in,  217 

Personal  security,  216 

Public  securities,  213 

Second  mortgages,  218 

Stock  of  corporations,  213,  218 

Time   allowed   for   investment,   215 

Trust  companies,  214 
PERSONAL  SECURITIES,  12 
PORTO  Rico,  220 
PROFIT  BY  TRUSTEE,  5 

PROVISIONS  OF  TRUST  INVESTMENT,  DUTY  TO  OBEY,  3 
PRUDENCE  EEQUIRED,  4 
PUBLIC  SECURITIES,  9 
PURCHASING  REAL  ESTATE,  13 
REAL  ESTATE  MORTGAGES,  9 
RHODE  ISLAND,  221 
SECOND  MORTGAGES,  12 
SECURITIES  IN  OTHER  STATES,  12 
SOUTH  CAROLINA 

Bonds  of  corporations,  224 

Care  required,  224 

Confederate  bonds,  225 

Continuing  investments,  224 

Deposit  in  savings  bank,  224 

Deposit  in  private  bank,  225 

Duty  to  invest,  223 

Guardians,  223 

Interest,  224 

Mortgages  on  real  estate,  224 

Personal  securities,  225 

Public  securities,  224 

Purchase  of  land,  225 

Railroad  bonds,  224 

Stock  of  corporations,  225 

Time  allowed  to  invest,  224 
SOUTH  DAKOTA,  226 
STOCK  OF  PRIVATE  CORPORATIONS,  11 
TENNESSEE 

Deposit  to  credit  of  trustee,  230 

Guardians,  230 

Interest,  230 

Mingling  trust  funds,  230 

Mortgages,  228,  229 

Purchase  of  real  estate,  230 


INDEX.  323 


TENNESSEE — Continued 

Kailroad  bonds,  228 

Time  allowed  for  investment,  230 
TEXAS 

Carrying  on  business,  231 

Care  required,  231 

Guardians,  232 

Mortgages  on  real  estate,  232 

Neglect  to  invest,  233 

Order  of  court,  233 

Purchase  of  real  estate,  233 

Time  allowed  for  investment,  233 

Vendor's  lien  notes,  232 
TIME  ALLOWED  FOE  INVESTMENT,  4 
TITLE,  DILIGENCE  REQUIRED  IN  TAKING,  6 
TRADE  OR  BUSINESS,  14 
TRUST  FUNDS 

Common  mortgage,  investment  in,  7 

Disposition  of  pending  investment,  4 

Separation  of  from  other  funds,  5 
TRUST  INSTRUMENT,  WORDING  OF,  3 
UTAH,  234 
VERMONT 

Authorized  investments,  236 

Bank  stock,  238 

Bonds    and   stocks   of   corporations,   239 

Care  required,  240 

Guardians,  240 

Mingling  trust  funds,   236,  239 

Mortgages  on  real  estate,  237 

Municipal  bonds,  238 

Personal  security,  237,  239,  240 

Probate  court,  order  of,  236 

Public  securities,  238 

Repairs,  239 

Stock  of  banks  and  trust  companies,  238 

Stocks  and  bonds  of  corporations,  239 
VIRGINIA 

Advice  of  counsel,  effect  of,  243 

Care  required,  241,  243,  245 

Confederate  bonds,  245 

Continuing  investments,   244 

Court  order,  241,  243 

Delay  in  recording  instrument,  245 

Deposit  in  bank,  243 

Duty  to  invest,  244 


324  INDEX. 

VIRGINIA — Continued 

Interest,  243 

Mingling  trust  funds,  244 

Mortgages,  243 

Personal  security,  244 

Purchase  of  land,  244 

Time  allowed  to  invest,  242 
VIGILANCE  IN  TAKING  TITLE,  6 
WASHINGTON,  246 
WEST  VIRGINIA,  248 
WISCONSIN 

Bonds  of  corporations,  252 

Business  or  trade,  255 

Deposit  in  bank,  254 

Duty  to  invest,  254 

Guardians,  251,  252 

Loans  to  officers  prohibited,  253 

Mingling  trust  funds,  253 

Municipal  bonds,  252 

Other  states,  investment  in,  255 

Personal  profit  by  trustee,  253 

Public  securities,  252,  254 

Eailroad  bonds  and  stock,  252 

Eeal  estate  mortgages,  254 

Sale  of  trust  property,  251 

Transfer  of  securities  owned  by  trust  company  to  estate,  253 
WORDING  OF  TRUST  INSTRUMENT,  3 
WYOMING,  256 


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